It is our top priority to help you get the biggest return on your investment when it comes to buying gold and silver. One of the most effective ways we can accomplish this goal is to help you avoid the common pitfalls many new investors make along the way.
It is important to realize that no investment comes without risk, but precious metals are one of the most dependable and stable investment options available and we are here to help you learn how to make a wise investment.
Below are the most common mistakes we see precious metals investors make that have a significant impact on their return.
Pitfall #1 - Setting Unrealistic Expectations
As the saying goes, patience is a virtue. One of the most common snares that investors get caught up in—no matter their experience level—is impatience and wanting to “hit it big.” Far too many investors focus on a short-term vision rather than investing in long-term success.
As an investor, it is important to create a strategy for success that spans years of investing rather than mere weeks or months. Before getting started, you should determine:
- Your long-term investment goals
- Your purpose for investing in gold and silver
- Your long-term vision
If, like most investors, you are intrigued by the opportunity precious metal investing offers because of the many global economic conditions, then you are already adopting a long-term mentality in regards to investing.
If you decide to begin investing in gold and silver, do it with the mentality that you are in it for the long haul.
Pitfall #2 - Blaming the Strategy
Many investors change their strategies too soon because they are not seeing immediate results. In all reality, the fault is not always in the strategy. Do not be someone who constantly changes their strategy when the results they desire are not forthcoming right away.
Give the strategy (and yourself) some time to work. Success in precious metals investing is not something that always happens in a few weeks or even months. It is important to manage your time, energy, and available capital with that in mind.
Keep a long-term mindset and strategy, and over time you are much more likely to see success.
Pitfall #3 - Misunderstanding ETFs and Physical Assets
One of the most critical errors we see investors make, especially with new investors, is mistakenly believing that owning an Exchange Traded Fund (ETF) is the same as physically owning the metal. To be successful, it is vital to understand the key differences between these types of investments.
Physical gold and silver have been recognized for thousands of years for their inherent value. No matter where you are in the world, anyone will recognize the intrinsic value of gold and other precious metals. In some cases, you can use physical gold or silver in exchange for cash.
Rather than owning the physical gold or silver, an ETF is when you own a piece of paper (known as a “promissory note”) that indicates the number of shares of the exact fund that you own. You do not own the metal itself. Rather, the ETF owns the gold, and you own a promise from the managers of the fund to pay your shares of the ETF.
You cannot trade an ETF universally on the market, and it is not widely or easily exchanged for currency. Also, the actual value of your shares is calculated differently than gold or silver itself based on which types of shares you own.
Pitfall #4 - Falling for Scare Tactics
Many unscrupulous dealers bait new investors into buying coins at a significantly higher price by using age-old scare tactics. Telemarketers hired by the firms tell investors that old US coins are not “subject to confiscation,” leading investors to wrongfully believe that newer coins and metals could be confiscated. Afraid that their investments will be taken by the government if they invest in modern gold bullion, investors purchase antique rare coins at prices dramatically higher than their market value.
Firms that utilize these tactics will spout claims to support their approach. Some say that collectible or commemorative sets are not subject to gold recalls. Others posit that coins over 100 years old are not subject to confiscation. The bottom line is that no federal law or treasury department regulation supports these claims.
Do not fall for these scare tactics. The only reason that you might want to pay more for antique coins is if you are a rare collector or speculator.
Pitfall #5 - Doing Minimal Research
When considering a new investment, it is common to ask the advice of a few trusted friends or to browse a couple of websites. However, in the precious metals market, this kind of superficial research can be quite misleading. Looking at general information or quickly choosing what metal type to buy could leave you with a lot of misinformation and dramatically detract from your investment value.
To develop a deep working knowledge of the market, you should spend significant time doing research and formulating your own thoughts and ideas. In addition to our Bullion Buying Guide, a few forums that we suggest are:
You can also find local investor interest groups on LinkedIn and Facebook, but it is important to understand that some of these groups may be formed by individuals or dealers who are using them as part of their business strategy. Just be sure to check their profiles and backgrounds as you consider the advice they offer.
Additionally, when reviewing news articles regarding the market, spend time verifying that the news is accurate. Check sources and verify any news on multiple trusted sources like The Wall Street Journal, Yahoo Finance, and Reuters.
These are just a few of the most common gold and silver buying mistakes we see new investors make. Before going all in, be sure to take these pitfalls into consideration. We also recommend finding a mentor with experience in the market whom you can trust to be unbiased and share his or her knowledge.
Taking the time to do your research, create a sound strategy and maintain a long-term mindset will make all the difference in your success in the gold and silver buying market.