How I got into bullion investing.

I thought I would just create a small history of the thought process that has brought me to where I am. I was completely ignorant of bullion investing up until about a year ago. I figured if I shared my experience it might help others.





I had been looking for something to invest my money in besides my 401K. I knew I needed to save more money for retirement but if I put it in a bank it usually gets spent eventually. Even if it didn't, inflation would eat it up over time. Also It seems my 401K has been losing more money than it has been making. Not only that but it is boring and hard to get excited about investing. I knew some people that bought antique cars. But you have to have a lot of space to store those. Plus I don't have that kind of money. But, one day I realized I could buy antique guns. So I bought some WWII era guns and have had some enjoyment in messing around with those. I figured they were a more fun investment because I could actually admire them while they were in my posession and even shoot them on occasion. But I realized when it came time to sell those guns it would take a lot of time, effort, and research to determine what their value was. Plus it would be hard to find a buyer willing to pay the correct value.


I had a small coin collection that my father had given me a few years back. I never had much interest in that and I knew selling it would be a major pain for the same reason as the guns. It would require a lot of research on each coin to determine what the value is. So I was not interested in coins.


Then one day I was looking for something on eBay and accidentally came by a 1-ounce silver bullion bar. I guess I never realized you could buy bars that small. I always imagined the giant gold bars you see in movies being stolen out of Fort Knox or something. So this got me thinking. Its pure silver. It is easy to determine the value because it has the weight printed right on it and all I need to know is the current value of an ounce of silver. So I began to buy various little bars of Silver and also dabbled in some copper, nickel, and titanium. That is until I realized I'd never get my money back on those due to the huge premium on those base-metal bars.


There was still one thing bothering me, though. I'm kind of a neat-freak and I wanted to be able to store these bars in a nice, organized way. But they were all different shapes and sizes. So I began to look for bars that were designed to be organized in some sort of container. I realized the Pamp Suisse and a few others would do this, but it was very space-inefficent being the way they stack. I realized coins would stack nicely inside of those "coin-safe" square tubes. But I didn't like coins.


One day I decided to pull out that old coin collection my dad gave me and look through it. I realized there were quite a few "American Silver Eagles" in there. When I examined them more closely I realized they were actually labeled with "1 troy ounce" just like a bullion bar. Then I realized that the ASE was essentially what I had wanted all along, it was just bullion and not a "collectible" coin. Plus, they will fit nicely into storage cointainers. So I bought some containers and began to buy ASEs.


After a while the ASEs became sort of boring. I wanted something else. I could only afford about $100 per month, so Gold and Platinum were pretty much out of the question. I had become somewhat aware of "junk silver" but I didn't really like it. I think honestly the main reason is because all of it I had seen so far was tarnished, dirty, and ugly looking. But I had some of it in my coin collection that i had inherited. One day I read an article on how to clean that stuff. I know a lot of people say not to do it, but I realized it was just silver bullion. So I cleaned it by soaking in acid for a few hours, then using baking soda, water, and a toothbrush. WOW! The stuff was shiney and bright looking! It looked great! So I began to purchase all kinds of junk silver quarters, dimes, halves, war-nickels, etc. As soon as I receive them, I clean them. I bought little coin-safe containers for each one. I used my label maker to make nice looking labels explaining what was in each tube.


After a while I started to re-think my 401K situation. I made a decision to cut my 401K from 6% to 3%. Partly because my company doesn't match the full 6% anyway, I think it is around 3%. So I am taking that 3% and having it deposited into a separate bank account. I have that linked to my paypal account. So every time money is deposited into that account, I go on eBay and look for good deals on bullion. So now I'm spending about $200 per month on bullion. Still not enough to consider Gold or Platinum. But I've been able to expand into other interesting coins such as old German silver coins and Eisenhower 40% coins.


So here's how I am working things now. My goal is to fill up all of the tubes of different types of coins. Some are already full. So I don't buy any more of those for now. When I fill up a new tube, I will move on to another type of bullion coin. I don't buy any bullion coin unless I plan to put it in a tube and fill that tube up with identical coins. So when I'm all done I'll have at least 1 full tube of each type of coin.


So the point is that investing has now become fun for me. Where before it was not.

 

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I agree collecting bullion is much more fun than watching a questionable 401k or a low interest savings account. I love to actually hold and look at my bullion and junk coins.

 

I would never advise anyone to use potential 401k funds to buy PMs, but that is an individual decision. Just keep in mind that over the very long run, common stocks will probably outperform PMs, perhaps by a lot. And purchases now come far into a bull market for PMs while stocks haven't done much for a dozen years. One day the cycle will change and you will be holding the wrong asset class.

 

What are those blue chips in that tube? I have never seen them.

 

Trading 401k in to buy bullion is not the best idea. Buying it with extra cash is the way to go. I wouldn't personally never touch my 401k for this sort of reason, but like to try to buy silver coins when I have the extra scratch.

 

I would equally caution people against investing in a 401k if you don't know where the funds are going. I'd also strongly disagree with your assessment that common stocks will likely outperform PMs. I think there is strong reason to believe there is a large amount of time left in the bull market for silver and gold. Largely because of the continual devaluation of the U.S. dollar.

The U.S. could easily be headed into a Japan type scenario where the stock market has a bear market stretching 20+ years.

 

I haven't seen them either, but I assume they're to protect the coins from scratching each other.

 

Silver Ike dollars from the 70's.

 

no offense but that is an ignorant statement, not many 401ks have done as well as silver and gold over the last 10 years.

Does that mean the bull will continue? Of course not, but if you look at the Federal Reserve's policies of devaluation of currency, then it looks like its a good bet to continue.

Not to even bring up all the issues that could potentially arise with 401ks and the governments debt problems.

 

I know the dollars, I mean the blue plastic spacers.

 

I don't disagree with that at all, but the penalty for pulling your 401k money out may not be worth it when we do not know whether stocks or PM's are a better investment. It all up to how comfortable some one is with either investment, and I probably should have added the penalty of pulling 401k money in my first comment.

 

http://www.ebay.com/itm/1971-1974-E...27?pt=Coins_US_Individual&hash=item4165620a53

Found this on ebay, they must be used to space them out.

 

If I remember right those blue plastic chips came with the OGW cello the dollars were packaged in.

 

I understood the OP to indicate that 401k contributions were reduced to free up money for PMs. In my mind, this is not extra cash.

 

Thanks for the info. Never seen em before.

 

Agreed. Def not extra cash in my opinion as well.

 

Nobody knows the future. Nobody knows whether the PM bull market will continue. I happen to think it will, otherwise I wouldn't be here. But PMs [and bonds] are deep into a record long bull market while stocks are at about the same prices as a dozen years ago while sales and profits have expanded. So if I had to choose the bargain priced asset class right now, it would be common stocks. I come from a value investing background and generally don't rely on macroeconomic predictions in choosing investments. Real estate is also probably underpriced, but that is a less liquid and more specialized investment category that doesn't generally interest me.

 

Just to clarify for some people. I did not pull any money out of my 401K to buy bullion. I simply reduced my weekly contributions by from 6% of my income to 3% of my income. So all of my 401K funds are still intact and I'm still contributing 3% of my income. I have read many articles suggesting we should invest 20% of our retirement funds in precious metals. Well, as it is right now my precious metals is at about 1%. So I figure I'll buy extra precious metals for a while and once I get close to that 20% figure, I'll bump my 401K contributions back up to 6%.

As for the questions about the photo - those are 40% silver Eisenhower Dollars. They come with the little blue tokens from the mint. I decided to keep the tokens and use them as spacers between the coins. Granted, that means I can only fit 10 coins in a tube now instead of 20. But that's fine, the tubes are only 50 cents a piece.

 

No one knows for sure, but I would have to say the smart money would be on equities for the next 10 years. All things eventually change and maybe they already have. I would rather have my money in an asset class that grows instead of just sits there. If the OP has been putting his money into PM's the 12 months as he stated, he did not do so well. The change may have already begun.

http://finance.yahoo.com/q/bc?t=1y&s=GLD&l=on&z=l&q=l&c=slv&ql=1&c=^GSPC

Like I said, no one know for sure, but it is all about being on the right side of the odds. With the huge run up PM's have had and the fact that they are selling for a hefty premium over production cost, it all points to PM's being on the wrong side off the odds. I know you will not get this now, but hopefully when you have a few more spins around the sun, you will begin to understand.

 

That was a misread. Paper pushers so often go that route - sad to see that spin here too. Don't agree with comments above suggesting everything 'needs to go to the 401k' either. (fwiw that retirement consulting has been my profession for +15 years, btw.)

The OP's choice to buy and HOLD bullion may indeed be better than whatever Paper return over the next ten years (by asset class.)
With now & future contributions, diversifying 15-30% into PMs with makes better sense than buying more and more Paper, if PMs are now <3% of all portfolio assets.

Try to buy the -15% PM mkt declines and always from reputable dealers at low premiums (as you would avoid buying overpriced insurance or front-load mutual funds.)

Just my two cents, you're doing exactly the right thing now.