2017 marks my 30th year in the rare coin and bullion business, and in that time I’ve had the opportunity to observe and analyze many clients’ buying and selling patterns when it comes to bullion investing.
Unfortunately, one of the patterns I see way too often is that clients tend to buy high and sell low.
I’d like to take a moment and explain the The psychology of why people do this, how to recognize it, resist the temptation and employ a strategy to help minimize giving in to this losing proposition.
One of the things any successful investor will tell you is never make decisions based on emotion. As skilled investors know, fast moving markets are tailor made to mess with your emotions. Resistance to these emotions is not futile, it is required.
I must admit that I myself have had to resist these emotions myself as doing this for nearly 30 years does not make you immune.
The Market is falling, the Market is falling!
When gold (or any investment) is traveling downward especially quickly or if it’s a trend over a period of days or weeks, our buying here in the office will inevitably increase. Why? Why are so many people selling low? Well the emotion goes something like this. “Oh no, the market is going lower, it might be crashing, I need to sell before it gets really cheap and I lose even more money!”
I admit it can be pretty difficult to watch your investment lose value before your eyes. It is even worse if you are checking prices daily or even more often than that. It’s uncomfortable, and selling your holdings would rid you of that discomfort.
Very disciplined investors will use this as a buying opportunity.
Now it is understood that one may need to sell for other reasons. You might need the money to put a new roof on your house, buy a new car etc. we are not talking about that kind of situation.
By contrast, in a rapidly rising market, the emotion goes something like this. “I really would like to own some more gold and silver and the market is going up so fast that I’d better get on board before it’s too late!”
Again, disciplined investors will take some profits at this point.
Capitulating to these emotions is a formula for losing money. Stay calm, take a deep breath, relax.
Taking the Emotion out of the equation
There is a much better strategy for bullion investing. Commit a monthly dollar amount towards buying tangible assets regardless of the market price. (Within reason) This strategy is called dollar cost averaging. It works very well with precious metals, and is often used to buy stocks. Don’t try to time the market. Doing that is nothing short of gambling, and what we want is a real world strategy.
It doesn’t matter if your monthly budget is $50 or $50,000.
You’ll find that over time, as market rise and fall, your average price will be reasonable. Also, you won’t have all your eggs in one basket, meaning you won’t own all of your tangible assets at a single price point.
At Gibraltar Coins and Precious Metals we offer customized dollar cost average and our Bullion Stacker Subscription program for bullion investing as well as rare coins. Your portfolio grows every month and it provides real tangible assets over a variety of price points.
A winning strategy.
Victor Ingraffia is the founder and CEO of Gibraltar Coins and Precious Metals. He has been a professional rare coin and bullion dealer since 1988 and a collector since age 5. Victor can be reached at 727-608-4885 or [email protected]