Investing In Gold and Silver Part 3–The Markets Option.

Time To Look At Other Investing Options…

In Part 2, We went into more detail about directly buying silver and gold. Now, let’s look at the investment side of precious metals.

You have other options for investing in gold and silver–the stock market and the futures/commodities market. These options are two that I personally am not using at the moment, though it IS on the table for the future. There are also gold based retirement funds and general gold and silver funds–which are NOT on the table, and shouldn’t be.

Investing In Mining Company Stocks

Investing in mining stocks is often a long term proposition–as mines themselves have a “lifespan”, and a new mine can literally take a decade or longer to begin operating. Traditionally, mining stocks appreciate in value when the confidence in the dollar is LOW, and decrease when confidence in the dollar is HIGH.

The advantage to buying mining stock is a fairly simple thing to understand–most are not expensive, and many pay dividends on a quarterly basis. When buying ANY stock, it’s a wise idea to go for the option that offers dividends over one that does not, and arrange to have the dividends reinvested automatically. This not only avoids the taxes on dividends earned, it greatly increases your investment leverage without costing you more out of pocket.

Choosing A Stock, For Newbies

Here is the really really simple checklist:

  1. If you have a choice between a stock paying dividends and one that doesn’t–get the dividends, and arrange to re-invest. In a “bear” market (negative), the worst that happens is no dividends. In a “bull” market (good) Higher dividends. As a rule the dividend stocks retain more value as well.
  2. Next, look at the PRICE TO EARNINGS RATIO. That link explains in simple terms. A BIG number means  it will take much longer to get a return on your investment, barring unexpected events. a SMALL number can be EITHER a company in trouble, or an undervalued company–so research.
  3. DO NOT DAY TRADE! Set up an account with a reputable trading company online, and plan on holding your stock. Day trading can wipe out your nest egg.
  4. ALWAYS keep some ready funds available somewhere that you can transfer to your stock fund. There WILL be market corrections coming, and when the market crashes, you’ll have funds to take advantage.
  5. RESEARCH THE COMPANIES WELL. A good place to start with stocks is on stock exchanges themselves like THIS ONE Another good option, and worth the subscription, is YCHARTS. Ycharts and Marketwatch are my go to sites. Note the link to marketwatch takes you to a gold mining stock, and the NASDAQ link takes you to their outlook for mining stocks. 
  6. DON’T put all your “eggs” in one basket. For instance, for the “gold and silver/mining” percentage of your portfolio, invest the cash in 2 or 3 different companies. Same with any other sector. That way, if companies experience a hostile takeover or are bought and sold, you can also profit :-).

Wow–Looks Scary Complicated, But ….

Actually, it isn’t–when you are buying and holding, which is what you should do. You’ll find gold mining stocks running anywhere from 3.00-30.00 or so per share on the list at the NASDAQ industry outlook link above.

Mining stocks should be handles the same way physical precious metals are–DOLLAR COST AVERAGING. Add a chosen mount to your investment account on a bi-weekly or monthly schedule, and LEAVE IT ALONE. But keep funds available for market corrections!

Remember this: AMERICA CREATED THE LARGEST NUMBER OF MILLIONAIRES DURING THE GREAT DEPRESSION–because smart people got assets and BOUGHT land, businesses and stocks at pennies on the dollar.

BTW–There’s An App For This!

Here are some links to information on various apps for investing:

  1. Huffington Posts’s Top Ten Investment Apps list. If you’re not into just buying mining stock, I HIGHLY recommend the Acorns App. It truly is set and forget, and the mix of stocks is a good one. Also, as it rounds up debit/credit card purchases and invests the change, if you’re a heavy card user you’ll build value quickly.
  2. STASH INVESTMENT— This app lets you invest as little as 5.00 at a time in a basic portfolio, or build your own, and it automatically debits your bank account of choice at regular intervals. The app is very easy to use, and fees are low.
  3. EXPLORE THE INVESTMENT GAMES! Google play is loaded with games that teach investing, and other more serious apps to turn you into a guru in baby steps. Other good search terms are “investment training”, “investment courses”.


All of the above options give you the ability to “set and forget”–which also helps you avoid the urge to day trade. And with mining stocks well priced right now, you have a good opportunity to begin building a portfolio for the future.

OK–So How Much Is Good?

If you’re using Acorns app, then you’ll never notice–it’s funded by the rounding up method. To give you a basic idea, in our house we are daily card users for the most part–debit card, and the “keep the change” savings option typically adds about 40.00 a month to our savings account/ Acorns account.

If you are using stash, then dedicating 50.00/month–25.00 every 2 weeks–works very well if you can afford it. We also dedicate the same amount of money to a savings account linked to the app, so when the market corrects, we’ll have a nice chunk of cash to buy stocks.

THIS IS THE SINGLE BEST THING YOU CAN DO TO TAKE ADVANTAGE OF LONG TERM STOCK INVESTMENT! Regular investing, with matching funds for larger buys available, allows you to profit both from the current strong bull market AND from any corrections.

In the next installment, we’ll look at things to avoid–the “paper gold” market.


More On Buying Gold And Silver

In Part 1, We Looked At “Junk Silver”….

So now, before we move on to other options, let’s look at STORAGE. Silver is the first choice for most precious metals buyers, for a few reasons:

  1. Inexpensive. Silver generally is running between 15.00 and 20.00 per ounce, while gold is around 1300.00/ounce.
  2. Silver is easy to recognize, and spend. Everyone can identify older American silver coins.
  3. Not mentioned before–but you sometimes still find 1964 Roosevelt dimes, “war nickels”–1942-1944 nickels were silver, and 1965-1969 Kennedy Half Dollars, which were also partially silver.

So, what are the drawbacks to buying silver, then?

  1. STORAGE. 2.2 pounds / 1 Kilo of junk silver runs around 400.-500.00 dollars. Great price, but the coins take up space, and are heavy if you’re going to be on the move.
  2. Because it is so inexpensive, it’s getting tough to find. Even in my largish city, there are regular occasions when NOBODY has any.

Best Ways To Store Junk Silver Coins.

Around here, we roll them up, and mark each roll with the weight in grams. We also keep a few handfuls of the larger coins–half dollars, as a rule, loose so if we need to we can sell/spend them. But storing the rolls does take up space, and if you end up with 30-40 POUNDS, you’ll need a small safe. We store ours in a portable Sentry fire safe, inside the gun safe.

If you are tight on storage space, then gold is the best option, as the 1/20th of an ounce “Panda” coins, from China, are extremely small. You can easily carry a few ounces of gold in a small change purse, or more.

We also like to roll the silver as that way, it is less subject to tarnishing and easy to keep track of.

How Much Gold And Silver Do You Need, Anyway?

Well now–that depends. As a general rule, we keep about 30 pounds of silver and 10-15 ounces of gold around, though the amount of gold can vary wildly based on the amount of cash available and current prices. We try to keep enough cash around to buy a few ounces in case the price temporarily drops by more than 5% or so, or we run into a really good deal.

The ultimate goal for US is to have a year’s worth of coins around to pay bills if needed, and a few months’ worth of paper money as well. But it takes TIME to get there, and dedication–buying coins week in and week out. We taught our children to invest 10% of each paycheck into metals, with the proviso that if they needed cash for emergencies, we’d buy the coins at the spot price for the day, saving them the premium.

Wait–I Thought There Was Only A Premium On BUYING!

NOPE. Most dealers also charge you a premium when they buy gold or silver from YOU. That’s why it’s a good idea, when possible, to sell your coins to a friend or see if you can use them to pay for services. Many small business owners, self-employed professionals, and even doctors will take precious metals in payment for services–we have made arrangements in the past with everyone from the guy we bought our house from to my doctors.

The key to properly stocking up on metals is being CONSISTENT. ANY amount you can commit to monthly, or per paycheck, is a good place to start. This is especially true with silver as the rise in price is typically a higher percentage at one time than gold. It’s not uncommon for the price of silver to rise 10-15% on a “hot” day, while a change in the gold price of more than the typical premium–therefore yielding a profit for you even if you sell back to a dealer–is far less common.

By spending the same amount over time, you can take advantage of “dollar cost averaging”, in two ways. “Dollar cost averaging” simply means you spend a set amount each week or month on an item, like stocks or metals. In weeks when the market is hot, you get less. But on weeks with lower prices, you get more.

Another thing you can do with silver is when there is a good spike in price–sell 1/4 of what you have. Then, when the prices drops down again–use the cash to buy more. In the nest article, we’ll look at buying metals online, and start to look at other options, like mining stocks.

Basics On Buying Precious Metals

Why Buy Gold And Silver?

Right now, the stock market is on a seemingly endless rally, confidence in the dollar is rising, the markets are reacting well to the election of Trump. BUT–Trump himself pointed out that the fed can’t keep interest rates low forever, and we’re facing a HUGE bubble in all sectors of the economy–and he is right.

The Sad Facts…

Our stock market is artificially inflated at the moment, due to Quantitative easing, that has been going on for years. It should be noted that more and more companies are artificially inflating their stock through “buy backs”–also a way to decrease the amount of publicly held debt when a down turn is expected.

The fed has kept the money supply high and the interest rates low for far longer than should have been the case–just as the quantitative easing has continued longer than it should have. In a healthy economy, NEITHER measure should have occurred at all.

We’re 20 Trillion dollars in debt. And that doesn’t include our unfunded liabilities, or all the toxic derivatives waiting to crash down on us. All told, we’re likely a shade over 150 TRILLION dollars in the hole–but since the treasury cash flow reports are something nobody pays attention to, it’s not something the average person understands.

This Is Why Hard Currency–Gold And Silver–Matter.

The dollar is what is known as “fiat” currency–IT HAS NO INTRINSIC VALUE. A dollar is only worth what you and someone else AGREE it is worth. It is “riches”, NOT WEALTH. WEALTH is hard assets–land, precious metals, precious stones. They have an intrinsic value. And right now, despite the rosy numbers the media likes to toss around, the entire world economy is built on false premises.

So now is the time to buy gold and silver. Get rid of any stock you hold in companies you’re boycotting, and invest in metals. Put aside 30.00 a week to buy a few ounces of junk silver. Oh, and stock up on toilet paper (seriously).

Buying Gold And Silver

There are lots of ways to buy precious metals–collectible coins, shares in gold funds, mining stocks, etc. I’m going to stick to the most basic ones in this article and bring up other options later.

When it comes to gold and silver, the best choice is coins, as they are easily recognized by the average person. After all, you recognize a 1950 quarter, don’t you? This is the best place to start. And we’ll look at silver first, as it is the most inexpensive and fungible (liquid) product.

Silver coins are sold in two forms–numismatic and junk silver. NUMISMATIC is collectible coins–and they can be VERY pricey. The biggest advantage to collectible coins is that over time they may increase in value more than Junk silver coins.

JUNK silver coins are coins that are too worn to be valued by collectors. Unlike Numismatic quality coins, JUNK silver is usually sold for a certain percentage above the “melt value”–meaning what the silver is worth melted down. So where a Morgan Silver dollar, weighing 26 grams or so (just under an ounce) may sell for HUNDREDS or even thousands of dollars in collectible form, the same coin as junk silver–if you found one–would go for around 20.00 at today’s price. BIG DIFFERENCE.

In a stable economy, or if you’re buying for the grandkids, you get the good numismatic specimens to hold for 50 years or so. In THIS economy, you go for junk silver. It’s typically going to be dimes. LOTS AND LOTS of dimes. Though you do still run into rolls of junk quarters at times.

Gold coins can be had as small as 1/20th of an ounce, as can gold bouillon bars/ingots. You’ll NEVER find “junk” gold, so to speak, though some will be lower quality or more common coins than others. The most common gold coins will be Canadian Maple Leafs and Chinese Pandas, though nearly every nation has produced gold coins.

Getting Ready To Buy…

When you’re ready to buy, you’ll want to look up the “spot” price for both gold and silver, the price they are selling for the day you shop. Also see if you can get a “melt” value for silver coins. Then, you begin comparison shopping.

Most cities will have several coin shops, as well as pawn shops, to consider. Pawn shops are a good place to buy if you want numismatic quality coins, and you may also find jewelry called BAHT chains there. But they’re not the first choice.

Your local coin dealer charges a “premium” to sell you coins. So, for example:

A local store charges a 10% PREMIUM. an ounce of gold is 1500.00. You would be charged 150.00 PREMIUM, for a total of 1650.00 BUT BE CAREFUL AND ASK IF THE PREMIUM IS BY THE OUNCE OR BY THE COIN! In recent years, due to drastic increases in precious metal sales, some shady coin dealers are charging either a set amount per coin, or a set percentage per coin. And as SILVER coins DO NOT COME IN STANDARD INCREMENTS THE WAY GOLD COINS DO, you can end up getting ripped off. A reputable dealer will charge a per OUNCE premium. Gold coins come in standard increments: 1/20th, 12/10th, 1/5th, 1/4, 1/2, 1 oz. SILVER COINS ARE NOT STANDARD. And if you’re buying junk silver–by far the best choice, then you’ll be buying by the ounce, or if you have the cash, by the kilo, and the coins will be weighed on a scale in front of you.

Once you have located all the coin dealers in your area, you’ll be asking these questions:

  1. What is your premium for buying, and selling? This number changes daily, and sometimes more often, and is based on the daily spot price. So a dealer will typically say 5% of spot, for example.
  2. Ask if the premium is based on weight or per coin?
  3. ASK IF THEY HAVE ANY JUNK SILVER. Since this is by far the most affordable option, they may not even have any in stock.

Some dealers MAY elect to sell junk silver based on melt value rather than actual weight–so, for example, if 1 Franklin half dollar is worth 5.00 MELT VALUE, ten will cost you 50.00 plus the premium. IF THIS IS THE CASE, IT NEVER HURTS TO DOUBLE CHECK AND MAKE SURE THE PREMIUM IS BASED ON MELT VALUE, NOT WEIGHT.


Places NOT To Buy Silver Or Gold (unless you know your market well)…

DO NOT BUY COINS AT GUN SHOWS! Unless you are a seasoned collector or know the market for junk silver VERY WELL, a gun show or collectibles show is the one place you’re almost guaranteed to pay too much–other than an auction, of course. You will get lucky–sometimes. but it’s rare.

DO NOT BUY COINS OFF CRAIGSLIST! Craigslist, free newspapers, and random classified ads online often lead to fake coins, over priced coins, stolen coins–or assault when you go to see the coin.

PAWN SHOPS ARE ONLY FOR THE EXPERIENCED. There are many reputable pawn shops that occasionally have collectible coins–but again, they will likely be priced higher than you’d get the same coin at a coin shop, so best left to experienced collectors.

AUCTIONS ARE ONLY FOR THE EXPERIENCED, ALSO–NEVER bid live. Determine the real value–or what you feel comfortable paying, place an auto bid–AND GO AWAY. Unless you are a serious collector, and can control auction fever, you can end up really screwing yourself.

Next article, tomorrow, will deal with storing your hoard, and actually using it. It might surprise you to discover that you can often get discounts on all kinds of goods and services by paying in coin….