Dollar Cost Averaging

I am attempting to do this. For silver do you buy once a month, the same day each month?

 

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Either every day, same day every month, every 6 months, every year, etc. Just keep it spaced equally, and the only thing that changes is how often you are buying.

 

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I'm assuming the dollar amount I spend must remained fixed. What's the best way to adjust it if I want to?

 

Always adjust your plans based on knowledge.

If you bought 10ozt of silver at $20.50 last month, maybe you buy 15ozt this month since it's at 19.50? Buying 10ozt is still a good thing, because you do lower your DCA. But buying more as prices decline allows you to lower your DCA much faster. "Doubling down" as it were.

Just make sure you always have a long term plan to invest and buy down your dollar cost average. And make sure you have liquid cash to make the investment with every month, quarter or year you buy.

Watch the market for entrance points. There are some times of the month that silver is cheaper than others. Contracts expiring, overbought, oversold, end of month/quarter/year.

Sometimes the bullion sellers have sales and specials trying to attract new buyers.

Sometimes the market goes crazy and prices skyrocket - maybe you buy a smaller amount.

I have one rule - NEVER ever buy after a multi-day price climb (3-4 days or more). Those that bought futures (paper markets) have a 72 hour clearing period and may turn around and rapidly sell driving a quick pullback.

Sometimes you just get lucky - don't discount this. I'd rather be lucky than smart any day of the week.

Last - don't listen to anything anyone tells you - including me. I could be wrong! Trust your instincts, use the force, etc...

Aim small, miss small...

 

I ran a scenario on Microsoft Excel. If I used the DCA method with $350.00 each month on the 7th of each month this year my price per ounce (Including the $1.25 premium I would pay) would be $18.42. The screwball method I used this year would have had me at $18.28. Guess I got lucky. It also helped that I bought a lot at $14 and Sold at $17.50. Wish I would have held a little longer. I'm learning. My next endeavor is to always buy at spot and sell at $1.25 over spot. Turn the tables on those dealers! I've got several connections with private buyers and sellers that might allow me to do this.

 

You made money - don't be disappointed. I also sold quite a bit of gold and silver before the recent highs - but I made money doing it. Sure, hindsight is always there - but booking a solid win is ALWAYS a good thing.

In case you become disillusioned, know that I will always be willing to pay you 50% of spot any time you ask.

Good hunting to you sir!

 

So I went to my coin club last night and talked to a guy that always sells silver there no matter what spot is. He told me to apply DCA principles to selling silver too. I am not much of a math guy. Brett, or anybody else have any advice on this?

 

It makes sense, if you're ready to sell. Otherwise you're highly likely to be moving silver - buying and selling with no appreciable profit to take. Most dealers have a volume buy discount and then charge a premium over spot. That's their operating margin.

If you can do it - why not? But make sure you have enough margin to cover costs and take a bit for yourself.

Otherwise, you may not want to sell yet. Just think it through.

 

Thanks for the input Brett. You're helping me cook up a plan.

 

IMHO, you are making this far more complicated than it is intended to be. DCA'ing has been used (and proven effective) for years with mutual funds and stock purchases. It is no more than putting $x amount of money into an asset on a regular basis. It can be once a day or once every six months...regardless of the market situation.

 

I am using DCA to lower my costs when I purchased at $30. Thought it was going to $50. LOL. I like to buy once a month. I have a log book to keep track of my purchases.

 

But if you're adjusting the amount you spend based on whether you think the price is low or high, you're not dollar-cost averaging any more. You're speculating that, since silver is cheaper now than last month, you should buy more. If it continues to go down, you've spent money that you should've saved for a time when it will buy more silver.

These are pure MARKET TIMING. These rules seem like common sense, but you have to keep in mind that everybody else seriously studying the market will have seen these same patterns, and the expectations they generate will be baked into the market price.

If you think you can make money timing the market because you know more than the rest of the market, you may be right, but the smart money won't bet on it.

 

"Dollar Cost Averaging" means one and only one thing to me. It means "I Bought Before at a Price That Was Too High and I Was a Moron". Of course, if you're convinced that the dollar's about to collapse and silver and gold will be the new money, you're actually a bit too far gone to be able to be helped anyway.

The graveyards are gradually filling with people who also were convinced they'd see the U.S. dollar collapse in their lifetimes, too. I sometimes buy some of their hoards at the estate sales their families need to run to raise cash. Each and every 2011 ASE I see was once bought at the very tippy top of a silver market that shortly went into a 5 year freefall. Jus' sayin'. They read Pat Heller too, and they were told their silver was going to $500 an ounce too.

 

Smart money always bets on educated guesses backed with facts, trends and topped off with gut instinct. The only "safe" bets are on even money.

When everyone hates an investment - it's almost always the time to start buying. That's what I did.

When everyone starts warming up to it - that's when you think about selling. That's what I did.

Stupid money follows the herd blindly, usually a day late and a dollar short....

I'm not always right, but I have been a lot more often than not - and that's turned into healthy investment gains the last several years.

It's not for the faint of heart, and it's there is always risk. But the more time you put into study, research and understanding the market, the better decisions you make. And believe me, I put in my research!

 

First, determine what is your reason for buying silver.

Don't be offended by this, but it sounds like you are a "day trader" of silver, making small profits that may not cover the expense of your time. I'm sure you're having fun with it, and it can keep one out of trouble, but would your time be better spent on something else? Think about how much real profit you have made this year. What does that equate to, as an hourly wage, for the time you have spent on this endeavor?

I have the "luxury" of spending a couple hundred dollars a month on coins/silver and I try to buy silver that can also have a numismatic aspect, as well. I've read that you do the same, by buying "junk" silver. If you're not making ample money on the buying and selling, perhaps you can focus on the numismatics and build a little "wealth" for yourself.

Just my 2 pennies worth, lol. (for the sticklers who get upset when someone doesn't say cent)

 

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I like the way you think! "Junk silver" is called that for a reason. The only value it will ever have is the bullion value. It's JUNK! Whereas numismatic silver, hopefully bought very near melt, is kind of the coin equivalent of buying convertible bonds. Yes, it moves as bullion moves - the rising tide that lifts all boats. However, if it ever becomes "fashionable" (and let's face it, that's where most numismatic demand has its roots) it can have an upside beyond bullion.

Doubt "fashion" matters? Look at the long history of toned coins. Toning used to be a detriment, now it brings a premium, to the point that "manufacturers" by the hundreds crank them out day after day to an unsuspecting market of folks following a "fashion" du jour. Successful marketing begets demand, nowhere more so than in coins.

This is also why being a trend contrarian also works. Demand can dwindle overnight when a new "next hot thing" gets marketed. Like even apparently dumb silver medals from the Mint. Wow, just wow.

 

Ok, so I went over my silver purchases and factored in what profit I made from selling and ounces from Coin Roll Hunting I accumulated. My DCA per ounce is $16.85. My profit based off current spot value ($18.75) only is $202.00. That does not include premiums from ASE's, Maples, and Zombucks. If I sell to private buyers my profit would be $407.00 (That's with conservative premium dollars factored in). I am in for $1,789.00 (What I have spent this year on silver, I made my first purchase ever in January 2016). So I think I am doing well. Others may disagree that I am doing well or think this is mere pocket change. I am making money and having fun doing so! If I get desperate and have to sell to a dealer, the one I do business with would pay me spot for Rounds and 90% and a $50.00 total premium for the ASE's and Superman Maples. Not going to calculate the Zombucks because I have no clue what a dealer would pay for them. So if I went to my dealer right now I'd make about $250.00. Best case scenario if I find buyers at my coin clubs and shows I go to I am up $407.00. Worst case if I have to sell to a dealer I am up $250.00. I don't know if anyone is reading this but it helped me know that I am making money. Now if Spot goes below $16.85 then I start losing money. Let's hope it doesn't do that.

 

If you're having fun and not losing money, enjoy yourself.

 

You've clearly been buying well, and between having fun and making money, there's little to argue with.

Just remember that silver has gone up over 30% since January, and it can easily go down just as much. Even with buying well, if silver goes back to its January price, you'll be in the hole. The only sure-fire way to stay ahead is to buy TODAY well below the price at which you know you can sell TODAY, and turn the stuff over as quickly as possible. If you hold it, you're gambling on price movements. But, as we all know, gambling can be fun!

DCA is a tool to maintain discipline as you gamble. It helps reduce your risk, but doesn't eliminate it.

 

I am running my budget for September. I am setting aside $300.00 for PM purchases. That's about a ten ounce bar and a roll of dimes. Anyone think I should do something else?