Why Buy Precious Metals

In order to understand if precious metals like gold, silver, platinum, and palladium are good investments for you, you need to understand the reasons people buy them. For instance, if you want to grab a stack of silver in order to make a quick buck, you are more likely to get an ulcer then any profit. You can read the experts, become an expert charter, due your due diligence, and find that the past does not always predict the future. Nobody has a crystal ball.

And if you are considering a play in the precious metals (PM) market, first make sure you have other bases covered. In other words, just like any risky investment, do not sink the whole farm on a hot tip. Have that emergency fund in the back so you can pay your rent or mortgage, keep your utilities turned on, and put burgers and beans on the table for your children.

PM Investors Need Patience and Funds They Can Afford To Risk

In general, most conservative investors who have made a good profit with PMs were patient people who really use this type of investment as a way to preserve their wealth during inflationary times, rather then a source of speculative income. An ounce of silver may have cost $5 a few years ago, and costs $17 today. But if you look at the actual buying power of that dollar value of an ounce of silver, you may find that it is similar because of inflation. It may look like a huge 5 year increase, but the price of a gallon of gas at your local pump has also increased quite a bit.

Some people do make a lot of money by speculating, but many people lose money. The thing to keep in mind is that you really don’t lose money until you sell your silver or gold stash, and it is best to purchase with funds you can afford to do without for awhile.

And of course, it sounds obvious to say that you should buy low and sell high. However, this simple logic seems to go against human nature. We all tend to get caught up in the hype of a rising market and back away from a sinking one. So many investors tried to cash in on the optimistic bull market so they bought silver for over $20 an ounce a few weeks ago. Now, silver seems stuck around $17 an ounce and many are complaining that they lost thousands of dollars. I hope that these people can hold onto their PM because I do believe that the curve will swing back up again eventually. Note that I am not a qualified investment advisor, and I do say, “eventually”.

Now that silver seems stuck around $17, those same optimistic investors of a few weeks ago have lost their nerve. But how much better would it be to buy now (or to have bought 5 years ago at $5/ounce), and then wait for another upswing. Can the price of silver drop more? Sure it can. That’s why it is called a risky investment. That is why you should enter a market like this with money you can afford to play with, and of course, DYODD (Do Your Own Due Diligence).

silver, bullion, gold, precious metals

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