Silver and Gold Investing? 5 Beginner Lessons Learned

Over the past several months as the economy has continued to wane, I've begun to look into precious metals.  Aside from collecting some coins when I was very young, I've never made any attempts to buy.

1. Can Be Complex to Purchase

I started the process by searching different precious metals dealers that I'd heard about in advertisements, etc.  I placed a call to one of them (www.goldline.com) and got some fast talking salesman who went on to try to sell me some Australian gold coins that could not be "confiscated" by the government if Uncle Sam decided to outlaw private gold ownership like it did between the Great Depression and the 70's.  I had told him that I didn't have any knowledge about gold coins and wanted to stick with bullion to keep things simple.  He went on to tell me that they could not take credit/debit card payment over the phone for bullion purchases and that they didn't even have any bullion currently in stock, anyway.  He would email me a set of wire instructions so I could wire the funds to my account.  I don't know about you, but this was way, way too much work for the amount of money I wanted to invest (less than $1000 to begin with).  I eventually found several ecommerce bullion sites that allowed me to purchase online with a credit/debit card.

2. May Have Minimum Investment Requirements

Another problem I found was that many of the dealers had a minimum purchase requirement that once again prevented  someone like me from participating.  Some required $1000, while others wouldn't even talk to someone like myself unless we have over $7000 to invest.  Lesson learned, do your homework and shop around.  While I made several purchases from a mint, thus far I've actually found that Ebay seems to be the easiest and most cost-effective place to get started.  While I haven't received my first Ebay purchase, many of the sellers I found have extremely high feedback ratings and have been selling for a long time.

3. Get Educated Before You Invest

One of the steps I took before investing was to purchase a book in order to get some basic knowledge and background information on the topic/industry.  The book I purchased was Rich Dad's Advisors Guide to Investing in Gold and Silver.

This book was extremely helpful and gave me a historical perspective of gold and silver and also some of the do's and don'ts of precious metals investing.  I slightly disappointed that at the end of the book, it ended up becoming a sales pitch for Michael Maloney's website, but am extremely grateful for the knowledge, none-the-less.  Read, read, read to educate yourself.

4. Large Markups are the Norm

Every company I've found to purchase from has had pretty significant markups on their bullion and coins over what the current "spot" prices are of these precious metals.  The spot price is the current price that these metals are trading at on the market.  I've found that the more you purchase, the closer you're purchase price is to the spot price.  Smaller investors (like myself) can expect to pay the highest markups.

5. Invest for the Long Term

I have no idea what the future holds for our economy, but I think most of us believe things are going to get worse before they get better.  In light of this fact, I've chosen to finally invest in precious metals as part of my portfolio.  Due to current price levels, I've started out investing in Silver American Eagles instead of gold.  I've set an investment goal for 2009 so that by the end of the year I'll have both metals in my portfolio.  

Any comments that you might have that can add to the knowledge base of those interested are greatly appreciated! Stumble It!