Is investing into precious metals affordable?
Many people who aren’t familiar with precious metals may think that it may be too expensive but if you purchase the right products you can make it affordable. I was also of that mindset not too long ago. I soon learned that it is very doable. That was one thing that got me excited about getting started.
I thought about what my end goal would be and how long it will take me to get there. I figure if I buy at least one coin a month that would be a good start. In 1986, President Ronald Reagan started the minting program for the gold and silver eagle coins. I found out if I would have bought an MS 70 silver eagle coin every month starting in 1986, I could have had over a million dollars by now.
A good place to start for most people is silver coins. Right now spot price for silver is about $20 an ounce and most coins come in one ounce. The premium is about $2 to $15 an ounce for bullion coins depending on the type of coin you buy. Paying a higher premium doesn’t necessarily mean that you are not getting a good value. For instance, a silver eagle coin is about $35 for a one ounce coin. The value could be on taxes that you can save when selling and that it has more value to other people because it is an official US government minted coin which gives it more credibility and numismatic quality.
Gold can be affordable depending on your budget and strategy. Right now an ounce of gold is about $1700 an ounce. If that is too much for you to make an initial and regular investment in then consider collecting silver coins and then trade them for gold later. Another way is to buy 1/10th ounce coins which would cost about $175 to $230 each depending where they were minted.
One thing that is very important to understand is that there is a lot of fake stuff out there so you need to make sure who you are purchasing your precious metals from is legitimate. If you are going to a local pawn or coin shop (not that your local shop is being shady) they may not have realized that someone could have sold them some fake coins. One way to test if silver or gold is fake is to check if it is magnetic by using a strong magnet. If you are buying a one ounce coin make sure it weighs really close to one troy ounce. I feel I don’t know enough about this to be sure so I stick with buying from a reputable dealer that is backed by the Numismatic Guaranty Corporation (NGC).
It is also important to know your prices. There are different factors involved. First of all there is the commodity paper price which you can check online or in a newspaper. It is called spot price. Bullion coins and bars should be close to spot price. Another factor in the price is premium. Premium consists of the rarity, cost of minting and markup from the dealer. Rarely can you find coins or small bars at spot price because there is at least a markup for the dealer. Also it may have a fraction of numismatic value due to rarity and cost of minting.
There are also coins out there that have a high premium due their numismatic value. Numismatic value is when a coin’s rarity and or craftsmanship creates a demand for its collectability. A coin’s numismatic value can go beyond many times the actual spot price of the silver or gold in the coin. If you seek the opportunity to make your investment grow more substantially, you should consider buying numismatic coins. This is my preferred route for now and occasionally picking up extra bullion coins as well.
As you can see, it is important to learn about what is out there and then start buying what you can afford. One day you may see that you have quite a collection that could be worth a lot more than what you have paid. The more I have been learning coin collecting and precious metals the more I am convinced that it is a great idea. I hope you will see what I see and learn what I am learning on this journey. It may change your life.