Your Questions About Invest In Gold Or Silver

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Donald asks…

I am trying to understand something about gold silver and precious metals and the price trends?

Okay, so people are buying precious metals to protect against an economic meltdown. But, in 2008 when things got rough, the precious metals prices crashed hard from like 22 to 9 dollars per oz silver. So, enlighten me on something… why wouldn’t I *wait* until the economy crashes again to buy precious metals, as opposed to being an idiot and buying them when they’re so high?

Justin answers:

You’re absolutely right in saying it would be better to wait for metals to crash in the expectation that you’ll effectively be buying low and ready to sell at the high when that time comes along. But you want to be applying this logic to a number of sector in which you invest so that you’re getting value through diversification.

I’m primarily an energy trader. I buy and sell stocks that explore for oil and gas. But I try to balance this sector orientation by trading precious metals miners. And I hold a substantial position in a company producing electricity without the use of fossil fuels—totally (100%) green. And then there’s a small position in the retail clothing sector. The idea is to diversify so that in poorly performing markets there’s still likely going to be a bright spot.

If you were to do as your essay above suggests, you could find your money is unproductive for several years for lack of an aggressive market in which to sell your shares. As for being an idiot? I don’t think I’m an idiot for making mistakes—but I know I’m teachable.

Len

Richard asks…

Why is the value of Silver and Gold going up so much?

Are Gold and Silver the best long-term investing options?

Justin answers:

Historically gold and silver have held their value in times of hardship. This still seems to be true.

PMs gain their value from:
– Rarity of the metals themselves
– The loss of buying power of the dollar
– The uncertain (political / financial) states of governments
– Uninformed people are buying precious metals because everybody else is PMs.

Precious metals are a way of putting your money in storage, that ensures you retain the value of your savings.

If you were to look upon gold as being a static commodity – it never changes in value, but you need more and more dollars to purchase one ounce of it. So, effectively PMs reflect public confidence in our governments and economists.

PMs value, long-term as a speculative investment, relies on the level of anarchy in our economic system remaining or escalating.

There is talk that silver – since it is a widely used industrial commodity – is rapidly becoming incredibly rare. BUT… We’re being told this by people who own silver mines (where production has stopped because owners want to take advantage of future markets) or who just happen to own metal dealerships who make commissions.

IMHO there are still millions of ounces of most PMs which are relatively easy to access. (Not to mention the recycling of PMs)

You have to judge for yourself whether these conditions will remain in place (or escalate) before you consider investing in PMs long-term.

Steven asks…

I am looking to invest in the stock market. I am 23 with little to no bills?

so i think its the best time to start. I want to invest in small companies and possibly materials like gold anf silver. I want to start with about 500-1000 dollars. Does anyone have any advice? I dont want to lose my money right away.

Justin answers:

First slap yourself in the face for thinking you can get quick rich. Small caps and gold aren’t exactly the wisest way to enter the market, you’ll just end flat on your face if all you think about is high risk and what people say is good.

Start with a budget to define how much of your paycheck you can invest every month, that determines the value that you have invested on the market. Let’s say your job is only as assured as the prospects of your company and that your company has to offer bonds at 7% per annum to attract investors because of the risks for that company. At a market rate of 7%, a $466 deposit every month for 40 years which is almost enough to max out your IRA would have a net present value of $76,913.54 so a commitment to deposit $466 a month for the next 40 years is the same as owning a $76,913.54 bond that pays 7% per annum. That’s what you have in your portfolio and as it’s heavy in bonds, you can invest aggressively in stocks.

However Ben Graham recommends no more than 80% stocks so you should structure your deposits to be 80% to a total market index fund and 20% towards bonds. Every year on a certain date you look at your balance of stocks to bonds and change the proportion of your deposits to try and equalize your proportions at your designated targets, as your future contributions will still be a large part of your portfolio for the first 10 years or so, you would aim for 80/20 in your portfolio outside of your future contributions. When your stocks and bonds including your future contributions riches your desired proportions then you aim your deposits to try and maintain that balance. Ben Graham says 45% stocks and 55% bonds, Markowitz has a tangential theorem where the risk free rate intercepts his efficient frontier, usually around the 40-50% mark. Claude Shannon at MIT proved mathematically that a division between a random walk and cash is best at 50/50 so it’ reasonable to assume an investment using bonds instead of cash as the secure component will likely be in the 40-50% range.

John asks…

What is the best way to invest my money?

I can invest about 100 a month and looking for a way to earn a higher interest than at the bank. What can I do to get a better rate of return?

Justin answers:

The only surefire way to make a profit is by investing in gold or silver.

Throughout the last 2000+ years, these two commodities have always grown in value. I like http://investingoldandsilver.com for buying gold.

The site tells you the current market value of gold and has a ton for sale. You can buy gold bars and coins but steer away from jewelry. Gold is more worthwhile (has a higher resale value) in its un-fiddledwith state. 🙂

Oh, and be sure to pick up a safe to store it all in.
Then, once you’re ready to sell it simple places like ebay get gold sellers the highest possible price for gold.

George asks…

What is a good place to start a website?

I’ve heard about blogs that you can actually make into websites and things like that – i obviously don’t know that much about it. I would like to start a website that could hopefully have 2 things: can host videos, and I can have memberships for (on three levels – like a gold/silver/platinum level membership-type thing). Is there a place like wordpress or angelfire or something that I can build this site with? Thanks!

Justin answers:

You will not be able to host videos on a free site. You barely get enough bandwidth and space for just the basics. Free is out.

So is shared. While shared gives you more than enough bandwidth and space (sometimes, lol) all it would take is a few videos and you would use it all up. You would need to invest in a server. And you would need to know how to run it as well.

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