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What advice would you give a small time investor looking to invest for a rainy day.


Richym99

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I'm very new to the investment business, not having been bothered about savings for the last decade. I spent my spare cash and time off work traveling the world for fun, something that I couldn't do until I was well past 45. I have a pretty good company final salary pension to look forward to that will see me relatively comfortable in my retirement in (probably) seven or eight years time, but nothing special. 

In November 2019 I decided to stop travelling and start putting some cash aside, to fund alterations to my home to age proof it, which are now almost complete, but I still managed to put away just under £10k in the bank that was doing nothing. Several of the guys I work with are into the collecting or stacking of bullion (mainly silver) but my interest was piqued by the gift of a gold sovereign from my mother. I had no idea until I looked up the price just how much that penny sized coin was worth, and was quite shocked.

Looking at what has been happening in the economy (through a layman's eyes at least) over the last year, and being fully aware of how cash can be devalued in the blink of an eye and a press of a few buttons should the treasury wish to lessen the burden of the huge deficit that has been build up over the past year, I decided to transfer most of my  cash to a more physical form or gold and silver. 

Over the past three weeks I have purchased 18 gold sovereigns, twelve of them as a mintmark 1989 released "Three monarchs box set" from Chards for £4034 (1895 to 1920 full sovs 1 each from London, Syd, Mel and Per mints for Victoria, Edward VII and George V). I felt it was a good basis for a collection.

Thanks to a member on here, I also picked up a full set of Silver 2oz Queens Beasts, and from various sources, a collection of 13 (so far) £5 Proof Silver Piedforts all commemorating milestones in the senior royal family life (birthdays, jubilees and wedding anniversaries from 2000 until the present). I figure they haven't got long to go and are likely to become more valuable as a collection rather than for their intrinsic value. I have boxes and COA's for every one. Together with a 10oz Una bar and a few other bits and pieces, I have about 4.25 oz gold and just under 2kg of silver.

The question is, what next?

I have, on an average month around £1000 to £1400 that I would normally be looking to just dump into my savings account. I would rather put that to better use rather than earning 5p on a thousand quid in interest. Should I continue in silver, or try and stick to gold where I can. Clearly, buying a 1oz gold Brit every month or a 1oz bar is going to be pushing things, whereas 3 full sovs at a small premium from a dealer is not. Or do I go with buying a 1kg silver bar every so often, even though you are paying a 20% premium to the gov in VAT?

I am open to suggestions from the experts who know far more than I ever will. No doubt I will make mistakes along the way, but that is all part of the learning process, but getting a good start is essential.

 

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Silver is not really very viable IMO in the UK with VAT unless you are willing to trawl ebay and antique fairs for low priced sterling like spoons and such (and they are bulky) 

Personally I would be going with low premium bullion Sovereigns - with the odd collectors coin if needed to keep things interesting.

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56 minutes ago, Clockpuncher said:

Why not split it 50:50 and pick up a couple of low premium sovs each month and chuck the rest in a stocks and shares isa - maybe a global equity type fund so you've got a spread of investments?

Definitely not interested in an ISA of any type. I want to be able to access assets when I heed to, and to be honest, stocks and shares have little interest for me either. 

 

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I understand your situation very well.
I invested heavily in silver and after about 10 years I can probably just breakeven if I decided to sell so compared to everything else was in hindsight a rather poor investment.
Silver is 30% cheaper now but unless you can overcome the 20% VAT is in my opinion not the best choice.
I continue to add some silver to existing sets but the VAT has killed it for me.
Avoid the VAT and I would accumulate more as silver has a lot of upside potential along with platinum.

Gold is traded on very small margins so it's purely a decision as to whether gold will increase in value or maybe take a nose dive for a few years.
Nobody knows so its personal choice.
Having experienced the market for well over 10 years, if I had surplus cash then I would buy gold sovereigns or one ounce coins if I could buy at 4% or less over spot.
I would definitely avoid proofs and overpriced sets sticking to good bullion.

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In terms of investment in gold specifically, I'd advice to stick with bullion - slight premium gold. Sovereigns are a great asset, but if you'd like to diversify you could look into the slight premium gold coins. Thinking about gold Brits, Australian gold nuggets, Panda's, etc. The problem with specialized coins (proofs, limited designs/editions) is that it's tough to say how it will retain it's value over a long period of time.

Sure, with the recent success of the Three graces coins it may seem very appealing to take a punt on such a coin, but such success is more the exception rather than the rule.

If I had your budget to spend on gold, I would probably look to either buy an ounce per month (Brit or Krugerrand most likely), or get multiple sov's and/or 1/4oz's. This is mainly based on their low prices and the fact that they are generally very liquid.

Also, I would 100% get this coin, but this is just my personal preference: http://www.perthmintbullion.com/Buy-Gold-Coins/1oz.aspx?productid=630

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Id say go almost exclusively for gold, and then pick up the odd bit of pretty silver for no other reason than you might fancy it. With the gold, as others have mentioned, you want pure bullion, Sovs and Krugs all the way, unless you thing CGT is going to be an issue, then swap the Krugs for Brits. With the Sovs, i'd say avoid buying every month, save up for 2-3 months and buy a larger quantity, there are plenty of dealers that offer closer to spot if you buy 5 or more.

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Invaluable info, thank you gents. I think you have confirmed my own thoughts about trying to stick to gold where I can, and just pick up the silver special editions where I know they can benefit the collection I already have.

Looking at my figures so far, I am running at about a 6% premium on my purchases, which I suppose isn't bad for a newcomer who started with little knowledge. Now I know where to look (not ebay!) to get that down a lot tighter. Probably I will look to buy a two or three of sovs one month and a one oz Brit or a Krug the next so it averages out or, as GBS suggests, defer for a couple of months and go for ten or more sovs in one hit and get the benefit of small price reduction that offers.

Ultimately, if I can build a collection value of around £50k when I retire to supplement the pension, I will be very happy.

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1 hour ago, Richym99 said:

Invaluable info, thank you gents. I think you have confirmed my own thoughts about trying to stick to gold where I can, and just pick up the silver special editions where I know they can benefit the collection I already have.

Looking at my figures so far, I am running at about a 6% premium on my purchases, which I suppose isn't bad for a newcomer who started with little knowledge. Now I know where to look (not ebay!) to get that down a lot tighter. Probably I will look to buy a two or three of sovs one month and a one oz Brit or a Krug the next so it averages out or, as GBS suggests, defer for a couple of months and go for ten or more sovs in one hit and get the benefit of small price reduction that offers.

Ultimately, if I can build a collection value of around £50k when I retire to supplement the pension, I will be very happy.

Unless you are confident of your ability to spot fakes avoid ebay at all costs for Sovereigns - best to stick to the big bullion dealers:) 

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6 minutes ago, watchesandwhisky said:

Unless you are confident of your ability to spot fakes avoid ebay at all costs for Sovereigns - best to stick to the big bullion dealers:) 

As I said, not ebay. Just looking on there, I quickly realised that you will pay at least a 10% premium on spot to cover the sellers costs. 

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Just on the topic of retirement, a friend is contemplating the idea of buying sovs on a yearly basis consistently for X years. 

After X years you have y amount of sovs. Let's say y is the equivalent to 25 sovs to keep it simple. It has now come to the retirement period and you have 25 sovs. The sovs can be liquidated as and when needed so after year 3 of retirement you decide to fund a new a car by selling 5 SOVS which still leaves you with 20 remaining. The liquidation process then continues as and when . . . 

 

Great versatility, and CGT exempt i really do see sovs being a sound private pension. 

 

 

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My monthly budget is exactly the same amount I put in my pension at work. I thought it would be a good old man story down the pub to compare the two.

Yep that's how interesting I am to spend 30 years planning a five minute conversation.

 

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7 hours ago, Pete said:


Silver is 30% cheaper now but unless you can overcome the 20% VAT is in my opinion not the best choice.
I continue to add some silver to existing sets but the VAT has killed it for me.

Many thanks for the good advice again Pete. 

I'm thinking it is not just the VAT making silver such a bad investment at this moment in time. The premiums on spot price for silver appear to be completely  ridiculous to me. A one ounce bullion silver coin at current rate is likely to cost at least £28 an ounce on the bullion market even before VAT. That's over a 50% premium on the intrinsic value. 

If there is a good reason for such huge mark-ups, that the gold market doesn't appear to suffer,  I'd be interested to know what it is.  

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25 minutes ago, Richym99 said:

The premiums on spot price for silver appear to be completely  ridiculous to me. A one ounce bullion silver coin at current rate is likely to cost at least £28 an ounce on the bullion market even before VAT. That's over a 50% premium on the intrinsic value. 

If there is a good reason for such huge mark-ups, that the gold market doesn't appear to suffer,  I'd be interested to know what it is. 

Just hype at the moment as far as I can tell. And of course some of it due to the VAT. Ridiculous is the right word IMO. 

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44 minutes ago, Richym99 said:

Many thanks for the good advice again Pete. 

I'm thinking it is not just the VAT making silver such a bad investment at this moment in time. The premiums on spot price for silver appear to be completely  ridiculous to me. A one ounce bullion silver coin at current rate is likely to cost at least £28 an ounce on the bullion market even before VAT. That's over a 50% premium on the intrinsic value. 

If there is a good reason for such huge mark-ups, that the gold market doesn't appear to suffer,  I'd be interested to know what it is.  

I am playing devils advocate here, there is a lot of attention to vat and the premiums. At the moment actinsons are selling 1oz Brit at £30 with free delivery. The first ad on the second hand market (here) all sold for £27.50 with postage on top. Does this not mean that the premiums and vat is past on down the line. 

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19 minutes ago, Bigmarc said:

I am playing devils advocate here, there is a lot of attention to vat and the premiums. At the moment actinsons are selling 1oz Brit at £30 with free delivery. The first ad on the second hand market (here) all sold for £27.50 with postage on top. Does this not mean that the premiums and vat is past on down the line. 

I can well understand that members on here are not going to sell for less than they had to buy them for. In fact, £27.50 is on the cheaper side. A couple of days ago I noticed one member sold 170 1oz coins at £30 a coin in parcels of 10. Can't blame him if people are prepared to pay that.

To an extent I suppose the traders will probably argue that their costs of handling silver coins is roughly same as it is for a gold one. I suppose what sticks out is that 3% premium on a gold sov is about £9 but £6 on a 1oz Brit is 33%.  

The price markup becomes a lot more stark though when you get to items like 10oz bars. How does the RM justify selling a bar with £180 of silver for £270 plus vat?       

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10 hours ago, Richym99 said:

. A one ounce bullion silver coin at current rate is likely to cost at least £28 an ounce on the bullion market even before VAT. That's over a 50% premium on the intrinsic value. 

Though I fully agree with you and making it one of the reasons why I currently favor gold, silver coins for about 26-30 £ are selling without issues, at least here on the forum. That indicates that perhaps silver is slightly undervalued, as plenty of people seem to be willing to pay a 30-40% premium over current spot price.

In my opinion, gold is currently still the better buy. Perhaps in about a year from now, the world has resumed to somewhat normal (referring to mining and logistics) and we'll see a drop in the premiums. Whether or not the spot price of silver will go down is a pure guess. I would not be too surprised if for the foreseeable future, silver will keep selling anywhere between 25 - 30 £ per ounce even if spot sticks around 20-24£.

Best place to buy silver currently if you are in the UK is probably second hand // this forum. For us in the EU we can still buy silver for about 25-27 EUR per coin (21-23 £) though hefty shipping costs deter some people like myself from buying at times. For more modest budgets, 30-45 EUR shipping costs on a 100-200 EUR purchase just seems a bit too much. It's great that we can buy with 3-5 EUR per coin cheaper than our UK friends, but with shipping being so expensive, you'd need to make a sizable purchase to make it worth while.

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