Enter the Foray (Writing Competition Entry)

[EyesoncryptoUK]

This post is an submission for the writing competition ending May 2020.

This post is written as a blog style piece discussing my personal experience in last 6 months of transitioning into the precious metal markets, focusing on silver bullion predominantly. Highlighting the top things that I have learnt with the aim of helping those who were in a similar position.

Thanks for reading and checking it out!

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I want to start investing in precious metals, what should I do?

So you are thinking of buying some gold or silver? That's great! I too had this thought not to long ago, it's been quite the journey so far.

As a child, the prospect of owning gold and silver is for one of pirates, dragons or stumbling across a pot at the end of the rainbow. I do not think anyone can deny at some point in their life they have thought about owning a vast pile of treasure. Very few decide to make the leap of faith when they are an adult, as the rat race of life seems to get in the way.

I too was sat on the sidelines umming and arr-ring about moving into this space, debating whether or nor I should be investing my hard earned cash into other assets. So once I had all of the life admin out the way,  the last few months I have learnt a lot about investing in precious metals. I wish to share my triumphs and failures in a hope to ease the skeptics and those still waiting to forage into the world of shiny metal.

 

The three things I found most important principles to try to adhere to, are the three points below.

 

• 1. "Get Your House in Order" 

As the world economy has recently taken a shake up, it is more important than ever to make your money work for you.

HOWEVER having a roof over your head, food in the fridge, bills paid for and loved ones secure supersedes this. Only once these things are accounted for should you consider investing. Use only disposal income for new assets, thus your hard earned cash can then be put to work.

 It is paramount you only risk that which you can afford to loose, a cliche but justified. All money assigned to investing in assets should be considered in your budgeting plan as gone and not coming back, make sure the important life things are done first.

 

• 2. Do Your Own Research

I am not a complete novice when it comes to investing, regardless of what asset you acquire, a golden rule is Do Your Own Research. Watching one YouTube channel, or reading one article in a newspaper that sways your decision, or buying because "Dave at the office said it's going up,"  are poor choices to act. This is a risk your investment, ignorance increases the probability of you acquiring losses.

Learning about and understanding what you are buying, how the market is influenced, what factors historically caused price fluctuations etc. All this is information you have to find, critically review and make an informed decision.  We now live in the digital age so obtaining information is easier than ever, just enter with a skeptical eye and check the authenticity of your source material and if you trust it's credibility. 

 

• 3. Set Realistic Goals/Targets

Everyone has a different story, how much you can invest is purely down to your own personal circumstances. Are you investing 50 dollars? 500,000 dollars? As stated always use disposal funds for investing. You need to decide on some form of investment strategy. Are you planning on making money in the short or long term? How much exposure and diversification is your portfolio? These answers will influences your decisions greatly went setting goals.

Try to be conservative with these goals and do not overreach. It is better to have a mindset of going 0 to 10%, 10% to 20%, etc. than trying to go from 1 to 100% all at once. Small steps at a time, will help your sanity and provide gratification as you hit each milestone.In a year or two of moving forward past each boundary, you will look back and  be surprised at how far you have come! 

Also allow the goals to be flexible, if you decide to buy every week a set amount that is great! You now have a plan. Though when inevitability you don't purchase one week because of X,Y or Z, it is okay, relax. Do not cause yourself unneeded stress or excess guilt upon yourself.

BUT If you find yourself failing your targets often, then you might need to just accept you were wrong when you first budgeted for investing. This is also okay, it is a learning curve, and to stress again, only risk what you can afford to lose. Instead of every week, you change and just get once a month. "Improvise, Adapt, Overcome." It is more beneficial that your goals are at more plausible level of attainment. 

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What brought you here, how did you get into precious metals?

Over the last few years I have been investing in cryptocurrencies, I wanted to turn my profits into something more tangible and diversify my long term portfolio. Precious metals are a historic store of wealth and value. Profits can be made but my interest is in there capabilities as a primary store of wealth. My stacking strategy of precious metals is long term, this pile of treasure is for future me and my children.

The existing monetary system of fiat, regardless of your political alignment, is a long term unsustainable system. In the fact that all fiat currency, runs the risk of hyperinflation consuming it and it becoming worthless.  The banking and financing world are a house of cards, that will eventually fall down. I am not saying the current climate of 2020 is this event, but I expect fiat to suffer and implode at some point in my lifetime. 

Precious metals is a way to hedge against this chaos and uncertainty. It enables you to fight against inflation and low non-existent interest rates on money in your savings accounts.

The  arguments for holding precious metals share similarities with holding cryptocurrencies, but metals are tangible, physical and recognizable.

In a "SHTF" scenario, where there are sustained periods of time with no power or internet, then even I have to admit that cryptocurrency is kind of useless. 

Hence why I am now building a position long term in physical precious metals.

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What is better to buy first, Gold or Silver?

The main thing I came to accept when searching for this answer is that silver is more volatile than gold, and the gold/silver ratio is off historical norms at present. And if like me you are in the UK silver is subject to VAT for being an 'industrial metal' thus increasing the premiums on the spot price of the metal. These were big influences in my decision when I first wanted to make a purchase.

 

Holding both or any of the other precious metals including Platinum & Palladium is going to increase your diversity and exposure to more markets in your portfolio. Also your initial investment value will dictate which metal may be best for you as gold requires less storage space for the comparative value of silver. 

I personally went for silver first as this was more within my price range and I intend to dollar cost average in until I have a hit my first stacking goal. Once I have that achieved I will then consider building a position in gold. 

What type of Silver is out there?

Silver in bullion form comes in a range of products. Coins and bars are the two primary groupings. 

Bullion coins are typically available in various weights. These are usually multiples or fractions of 1 troy ounce. In some jurisdictions these are classed as currency or legal tender which exempts them from certain taxation rules.

Bars however do not have this association as legal tender. Bars can be produced in multiples or fractions of troy ounces. As well as availability in metric denominations, 100 grams, 500 grams etc.

There is also the collectible side of silver, a market for limited minting and uniqueness. This is the numismatic and semi-numismatic coins and markets. Where a premium is attached to the coin's value due to uniqueness and desire from collectors.

 

1oz Silver Bullion Coins

The initial type of silver bought by new stackers, including myself is silver BU coins, most notably America Silver Eagles, Canadian Silver Maple Leaf & Silver Britannia's. Currently these coins are costing above normal premiums due to the influx of demand of new buyers eager to hedge and protect their wealth during these unprecedented times. These are issued from national recognized mints and are considered as legal tender. 

These types of coins are the standard (most common) exchanged bullion coin. If you are interested in just the spot price of the metal you and you want to stack X weight of metal for long term. Then you are more likely to go for these staple variety of bullion coin, you'd be less interested in the collectible versions of bullion, the numismatic and semi-numismatic coins. 

These coins are also easier to liquidate into cash should the need arise. It is easier to sell some coins than a huge bar that you can not break up, dependent on your need for capital.

 

Please note that coins minted from other sources while being 1 oz and coin like in shape are not considered legal tender and are referred to as "Rounds". This is something that caught me out and that I didn't fully understand when I first started stacking, and can be a common hurdle for new stackers to overcome.

 

Collectible Coins

This section of the market is where trading and second hand selling can yield a profit. These select minted coins have additional premiums on them based on demand of the vast network of collectors. Many mints offer series with each coin only available each year, or variations of existing prints, the oriental bordered Britannia for example.

There is a probability that if you bought a tube of the first released in a series, then for example four of five years later, you could see the premium increase over time. As the rest of the set comes out it could become more popular and people are eager to complete the collection because they weren't stacking when the collection began.

There are also proof versions of coins minted, in which a set batch is minted to a much higher quality and is also numbered. Increasing its potential premium and rarity as a collectible item if you come to resale. 

There also coloured and gilded versions of collectible coins which share the same exclusivity and desirability among collectors.

Fractional Coins

It is possible to buy silver at smaller values of weight, both larger and smaller. 10 oz silver coins, 2 oz silver coins and 1/2 silver coins are all viable options and come minted in the numismatic forms. The key thing to note with fractional coins is the premium. Smaller minted coins have a higher production cost than larger coins, and buying in larger quantities reduces the average price you end up paying per ounce. 

10 x 1 oz coins are generally more expensive than 1 x 10 oz coin. Even mints and dealers will lower prices on larger bulk orders of an item, it might be a small margin but it all adds up in savings over time, making your purchasing more efficient.