As a coin dealer, we meet with different types of people on a daily basis. We have a large and diverse customer base ranging from hourly employees to CEO’s of organizations; all with different approaches and reasons for purchasing gold and silver coins. While our customers have individual preferences as to what constitutes a worthwhile investment, there appear to be similarities, or common characteristics that define our most successful gold and silver coin buyers. In this article, we’ll discuss what we believe to be the 5 essential qualities to long term gold and silver coin investment success. While many of our customers are inherently gifted with these qualities, anyone, with a little time and effort, can overcome the stumbling blocks to their success.
Our most successful investors know the coin and bullion market inside and out. I’m always amazed at the level of knowledge many of our customers possess, and learn a considerable amount through our discussions. These individuals are not only familiar with the current state of the market, but many also know their history. While somewhat indirectly related to coins and bullion, many of our investors site the book The Creature from Jekyll Island by G. Edward Griffin as the reason for investing in gold and silver coins and bullion. As they say, knowledge is power, so we recommend learning everything that you can about gold and silver before making your first investment.
As is the case with the stock market, the price of gold and silver can be quite volatile. In fact, it’s not uncommon for daily fluctuations to exceed the volatility of the stock market. Needless to say, investing in gold and silver coins is not for the faint of heart. This means that in order to be successful, it’s imperative that you remain steadfast and unwavering in your resolve. Granted, the reason for investing in gold and silver coins should occasionally be reviewed, but if nothing fundamentally has changed, then you should stay the course.
The most successful gold and silver coin buyers are contrarian, which means that they tend to go against the grain. This takes an incredible amount of intestinal fortitude, as it requires taking the opposite approach of the general market. Many of our customers have been investing in gold and silver coins for 20 – 30 years, during which time, the returns relative to the stock market have varied. However, over the past 10 years, precious metals have been one of the top performing asset classes, while stocks, for the most part, have underperformed. In other words, the compound return realized by gold and silver coin investors over this time period exceeds that of stock investors.
Long Term Approach
Investing in gold and silver coins isn’t likely to make anyone wealthy over a relatively short period of time; however, considering the state of the economy, record debt and deficits and the loose monetary policies of the Federal Reserve, precious metals should perform well over the long run. Many individuals make their first foray into the gold and silver coin market when precious metals are performing well, as they don’t want to be left behind. Following a sharp pullback, which on occasion occurs after a large run up, these individuals become disenchanted, and abandon the market. Of course, had these individuals taken a contrarian approach, and purchased gold and silver coins following a sharp sell off, they likely would still be in the market today.
The last characteristic, which isn’t necessarily top of mind, is to have a certain degree of humility. The gold and silver coin market has been known to make many individuals humble, especially following the record sell offs in 1980 and April of 2011. Admitting that there are forces affecting the market that are unpredictable is not a bad thing. For instance, COMEX has the ability to change margin requirements at the drop of a hat, which could result in a steep sell off. Additionally, there are other factors, such as large short positions taken by large commercial banks, such as J.P. Morgan, and physical bullion shortages, which can greatly affect the price. Realizing that ultimately market forces will prevail should help committed investors to stay the course.
In summary, we’ve identified what we believe to be five characteristics of successful gold and silver coin buyers. Before delving into the world of precious metals, it’s imperative that you take the time to learn as much as you can about gold and silver, including the performance history of each, factors that affect the value, and their volatility. Once you’ve taken the time to educate yourself, stay the course and look for buying opportunities when others are selling. Take a long term approach to investing and approach the market with a degree of humility, and you’ll likely experience success as a gold and silver coin buyer.