Saturday 8 December 2012

Beginner's Guide to Investing Silver





1. Why Invest in Silver?

There are many reasons as to why one should consider making silver a major investment in his/her portfolio. The primary reason is to fight inflation, caused by the out of control money printing. Inflation is explained as the price of goods becoming more expensive. But a better way to describe inflation would be the price of good becoming expensive due to the continuous devaluation of currency. As you might understand from economics 101, the market is governed by the law of supply and demand. 
When there's more paper money (supply has increased), it will cause a decrease in its purchasing value. So, your money basically becomes toilet paper!





One might ask, so if I want to beat inflation, why not I invest in the stock market? While investing the stock market might be a good idea, the case of rapid inflation or hyperinflation would cause your money to be worthless. The stock market might go up, as the result of more money printed, but your purchasing value could have been wiped out completely. Thus a RM1.00 stock going up to RM100 due to hyperinflation might result in you being a millionaire, but a million could perhaps only get you a loaf of bread. While owning Silver or the physical precious metal, could help you pay for more than a loaf of bread. Also, bear in mind that the current shaky condition of many banks should serve as a reminder that your paper assets might not be safe! You could hold millions of ringgits worth of stocks, but if your brokerage goes bust.... 

Thus, above are the arguments for owning the REAL STUFF...the metal. Anyhow, more sophisticated investors can hold both the paper asset, investing in Exchange Traded Funds or SLVs, and also hold the physical metal itself in a safe.

#ETF (Exchange Traded Fund) such as the SLVs invest in Silver Mining or Silver-related companies, that together create basket of investments. It's like buying a mutual fund, but with the specific exposure in mind: to capture the gains in the upward movement of Silver prices. 




So, all talk but nothing else should be boring up till now... I highly regard these videos as a MUST WATCH:

Watch in order: 

a. http://www.youtube.com/watch?v=E5VNAEmmBQM
b. http://www.youtube.com/watch?v=tj2s6vzErqY


Why should I listen to him? What are his credentials?
Because he saw it coming. Below video should summarize it up

http://www.youtube.com/watch?v=PAQmXaJEc7k
 
Here are some further respected people of the community that you should check out, if you are interested in further educating yourself:

David Morgan http://www.silver-investor.com/
Gerald Celente Trends Journal
Peter Schiff

You can Youtube them all... and listen to their views about where the market is going as a whole.
Additionally you can checkout TV programmes on Youtube, such as #Capital Account 


2. I'm sort of Half-Convinced. So what now?

You might want to consider taking action now, while silver prices are still low. I bought at $27/oz (ounce) region, and am still buying. It's not too late to buy into Silver, and as always, you can wait for a lower price, but in the meantime, stack up some first! By using the averaging technique, you could over a period of time lower your investment cost! Personally, as long as Silver is below $50, I still consider it cheap! And unless there's a significant change in government policy of unscrupulous money printing, I will continue buying more. So, you can buy Silver in primarily 2 forms:

a. PHYSICAL BULLION OR COINS :::Comes commonly in a bar or coin form, weighing 1oz or 31g. It also comes in 2oz, 5oz, 10oz or more, depending on mints:::

Feel free to checkout the sellers, but don't take it as a recommendation from me. I have bought from some, and you can check them out too.

SilverforMalaysia.com
Merlip.lot.my
Nubex.com.my


So far these 3 sellers are selling at less cut-throat prices. Bear in mind that Physical bullions do carry a certain amount of premium above spot price. 

#Spot price = Price that is quoted live on the boards, such as Kitco.com. Btw, Kitco does have this live app you can download onto your computer.
Also checkout Netdania for apps for your android or apple phones. 



When you browse through the products, please bear in mind that bars are always cheaper than coins due to import tax. Some mints are going to charge more than others, so if you are in purely for investment purpose, please get only the bars such as Morgans, Scottsdale, OPMs etc. Products such as the American Eagle would also make a good investment if you dont mind paying more. Some of the benefits of owning the American Eagle would be ease of recognition. In a post apocalypse world, people would readily accept it. Also, some countries have laws on importing precious metals. In some countries, the American Eagle is looked upon as purely money, and thus you would have no problem bringing in 500oz of silver, as it only represent a face value of US$500. While silver bars which represent 500oz, might get you in abit of trouble!



American Eagle

Some might even love collecting numismatic coins, which are often priced a lot more above the spot price of silver. The prices differ and are usually attributed to amount minted, year minted, rarity, condition, etc. Investing in numis require much more study, but could pay off really well...such as those who held on to Chinese Pandas. It can be your side thing, but the best bet is still investing and buying coins or bars as cheap or as near as possible to the spot price. 



Chinese Panda

b. PAPER SILVER :::Is like owning a stock; you don't hold the physical metal:::

You can also opt to invest in paper Silver, though I highly not recommend due to my earlier fears of "counter-party" risks. However, I still must educate you on how to do it. As of my knowledge now, only Maybank offers Silver Accounts. You can easily google this up or drop by the Maybank branch to enquire about this. They are selling the investments on per gram basis. 

If you are more of a trader type of person, or simply just wanna try your hands on trading, I highly recommend FXCM. 
Easy to register, and easy to deposit using even your debit card. 


Link: http://www.forexmicrolot.com/

Note of caution: Please beware that your investment can be easily wiped out due to volatility. Make sure your account is well funded, as per pip can cost a minimum of US$0.50. That said, I recommend you checking it out only, and not trading it.

3. Final thoughts

A good price to enter would be between $26.50/oz to $35/oz
But who's to say anything about the best price? An investor should enter precious metals with the first thought in mind: to preserve his/her wealth
But, silver does have the ability to not only preserve, but multiply wealth. Even so, do invest with a certain amount of awareness. Perhaps a good way to comfort yourself is that Silver and Gold is highly manipulated, due to unlimited printing of the US Dollar. One should not be worried too much about the price, but rather maintain the mindset that you are protecting your wealth. Do it before it's too late!