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10 Critical Mistakes To Avoid Investing in Gold & Silver!

gold and silver

Investing in gold and silver is a wise decision if it is done the right way. The right investment approach requires making good research, having an open mind to learn. Sadly, most investors are lazy in learning and developing new skills.

Therefore they fall into pitfalls that are quite common. Here are our recommended gold investment books you may consider looking.

Here are the top 10 mistakes to avoid at all costs. These mistakes are the ones separate from average investors that routinely lose money and the profitable investors that banks consistent profits.

1. Not having a diversification plan

Diversification is the number one concept of investing. An investment portfolio must be well diversified to survive in the long term.

This means not depending on any form of asset, but keeping a mix of investments of higher and low risk.

If you plan to rollover your retirement to gold you shouldn't do it using all of your retirement savings. As an investor, your first objective is to stay in the game. To stay in the game you cannot afford to lose everything you have.

Therefore, don’t invest in gold more than a certain portion of your money. I am not here to tell you should have 25% or 35% of your money in precious metals.

The amount you want to invest in is your personal decision. However, use your common sense when making investment decisions.

2. Not understanding dollar cost averaging

Dollar-cost averaging (DCA) aka “constant dollar plan” is an investment technique in which an investor splits up the overall amount to be spent by regular purchases of a target asset in an attempt to reduce the effect of uncertainty on the overall purchase. 

The acquisitions occur irrespective of the price of the asset and at regular intervals; in essence, this approach eliminates much of the analytical work of trying to time the market to allow purchases of equities at the best rates. 

3. Paying too much in fees

The reality is that gold has high hidden costs, and not revealing the whole story while looking at the numbers on paper. Here are three major expenses that many investors ignore.

Higher Taxes

The affinity for gold ownership and a government dislike seem to go together, from reports that huge government debt will make the dollar worthless to conspiracies it will be another Executive Order 6102 under which Uncle Sam will raid your safe deposit box and request your gold.

High Ownership and Storage Costs

Perhaps you can reduce the tax burden on gold by some innovative accounting or selective tax-time amnesia. But one burden that you can't stop as easily is the high cost of owning gold.

You need a secure storage space you have to plan in advance. Keeping gold at home is not a good idea.

You would probably need depository storage. If you are investing from your retirement assets then you must work with IRS-approved depository storage. Here are the best gold depositories in the US that you may want to take a look.  

High Spread

Spread is another expense that is very sneaky. It is the difference between the buy and sell price that can really hurt your investments if you don’t pay close attention.

If you invest in gold during an unstable time of the economy, expect to pay a higher spread. Different gold custodians apply different amounts of spread. Be conscious about the gold price by the time you want to invest in gold.  

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4. Not setting realistic expectations

Most people investors believe they can do millions with only a few hundreds of dollars of investment. Although it is completely possible, quite unlikely to happen.

Even doubling an initial investment every year is unseen in any market you can think of. Let’s face the truth right away. You will not build a fortune investing in gold and silver. Because these assets have substantial market capitalizations. 

Change in prices of gold and silver can make you meaningful earnings if your initial capital is a meaningful amount as well. You should know the fact that for one to earn the other investor(s) should lose.

Gold and silver are not the types of assets to speculate on. They have a certain function in the portfolios and they serve exactly that goal. They are inflation-proof and maintain their worth especially during the times of an economic crisis. 

Is that mean, you cannot profit investing in those metals?

Absolutely not! You can definitely profit from investing in them. However, not enough to build life-changing earnings with too little initial capital.  

If you wish to make unseen earnings you may want to look at speculative assets like cryptocurrencies rather than precious metals. However, the tradeoff would be the high amount of risk you take for your investment. 

Two popular cryptocurrency investment options, used in IRAs are Bitcoin IRA and Ethereum IRA.

Gold and silver are not speculative assets to make substantial profits from short-term price movements. Therefore they may not be appealing to all types of investors. 

However, if you are looking to grow your capital, taking not much risk gold and silver investment is your best bet.

The secret to success is the full awareness that gold or silver investment is a long-term proposition. Your success can only be measured over many years, not weeks or even months. If you're trying to “get rich quick” I suggest you better stay away from the precious metals.

At this point, I assume you want to invest in precious metals. You should ask yourself a few important questions that I outlined below.

What do you expect from your investment?

What you expect from an investment depends on your investment objectives. A college student and a retired person would probably have different expectations. Therefore, they would manage their money entirely differently.

Someone who is in his early 20s may be willing to take more risks, while an older individual probably looks to better diversify his investment. Therefore, know beforehand what that investment means for you. 

Why do you think gold and silver can be a good investment choice?

You want to invest in gold and silver not because they look good. You want to grow your assets, maybe you want to secure them against the inflationary loss.

Although they all are valid reasons, usually one aspect of the precious metal investment weighs heavier.

It is the feeling of security of precious metal investment. By investing in precious metals you know there will always be buyers, sellers therefore there is almost no chance to lose your entire investment like in a stock crash.

Sure, precious metal investment can be profitable. However, it is not a good reason to invest in precious metals. You should consider precious metals like secure commodities rather than stock of the company X.

Would you be able to stick your investment plan for years ahead? 

Let’s say, you have decided to invest some of your money in gold. It can be a good decision depending on at what point you enter the market. However, did you have a long term plan since precious metal investment will likely create nothing significant in the short term.

When your investment plan doesn't yield immediate returns, you should not jump from one investment vehicle to another. Because this is basically what most losing investors make.

They try to invest in the “next big thing”. Then they find themselves purchasing metals back at much higher prices.

5. Focusing on the short term price movement

Some individuals may spend years pursuing the next big thing, sometimes assuming that this idea is “the one.”

When that specific strategy doesn't produce the results they've been waiting for, investors' typical reaction is to blame the strategy and start to follow another quickly. 

They don't notice the main issue lies inside themselves and not in a particular strategy or approach.

Market is likely to visit lower points than your original entry point. At these times you may feel like you are losing. However, don’t let this fool you. Unless you pick the absolute bottom (which is very unlikely), the market will visit lower price points anyway.

Always be willing to take a step back, and remember your original investment plan.

Give your strategy a bit of time to play out. I can't emphasize enough that investment in precious metals requires a long-term approach. 

Success in this scene is not something that could be measured exactly in weeks or even months. Therefore, take your time and plan everything in order to use your energy and capital productively.

6. Assuming all forms of gold investment are created equal

Not all forms of gold investment are created equal. There are so many different gold investment options like physical gold, gold ETF, gold mining stocks, etc.

Don’t assume all of these investments valued exactly according to gold’s price. Most investors don’t know what is the difference between having a gold ETF, gold mining stock or physical gold.

Investors assume that owning an Exchange Traded Fund (ETF) backed by gold like GLD, is the same as owning the physical gold itself. That is true to some extent, and knowing the key distinctions between a gold ETF and physical gold is very important.

For thousands of years, physical gold and silver have been highly desired and recognizable commodities easily exchanged on local and international markets.

You can take your physical gold from Los Angeles to Nigeria and exchange it by maintaining its, most of the intrinsic worth. You may exchange your physical gold or silver for cash worldwide.

As you own a gold ETF, you essentially own a piece of paper. It is nothing but a contractual note indicating how many shares you possess. However, a gold ETF doesn’t guarantee you the physical gold ownership.

The ETF owns the money, and you are promised to be paid back from the fund managers the value of your share.

The ETF certificate is not commonly traded on international markets, nor is it generally accepted, or readily exchangeable for currency.

You'd have a really hard time trying to exchange products or services with these paper certificates in the same way you'd be with physical gold.

Let’s take a look at one of the most widely known gold investments, GLD. 

The key drawback of paper gold is the inconvenience of its conversion to physical gold. Although investors may have a physical gold claim, they will learn through the harsh experience that converting it to physical metal is so much harder than they had thought.

Investors may not understand they don't own actual gold when investing in GLD. Yes, in principle, GLD is indeed a physical gold-backed ETF, and one share of GLD should be 1/10th ounce of gold.

Yet the reality is much more complicated and brings significant redemption constraints.

First, the GLD trustee needs special permission to redeem GLD shares for physical gold. This permission is generally for brokers and major institutional investors. 

Second, shares can only be exchanged in lots of 100,000 around $17 million at today's rates.

Third, the fund reserves the right, according to GLD ‘s prospectus, to settle gold requests in cash instead of physical metal. But even though you purchased 100,000 shares and were allowed to redeem them, you would not get your physical bullion.

Another dimension of investing in GLD is how its price falls in comparison to the futures market's spot price of gold.

Although GLD ‘s initial price was set to reflect 1/10th ounce of gold, this arrangement was not maintained as GLD is subject to its own economic variables as well as a decrease in value by management fees.

Without going into too much depth, GLD ‘s price is strongly linked with gold's spot price changes but doesn't suit those movements exactly. For example, a large buy or sale of GLD shares can bring the price up or down, without changing gold's spot price.

Ultimately, if you understand the language of an ETF prospectus critically, you'll see your investment in the ETF may be worth $0. 

It reveals two important things to remember about ETFs: 

  1. You trust someone else to assess the worth of the gold owned by the ETF
  2. You trust that the hedge funds genuinely have enough real gold to support your deposit, and all other shares invested as well.

These two issues are neutralized when considering owning physical gold. Next, the value of your investment is valued by the actual market rather than a financial adviser. 

Second, if you have the physical gold, you fully know what it's worth at any time. Therefore, you're not relying on any person or individual to value what you have.

The risk of real gold being meaningless is nearly unlikely, considering that gold and silver always maintained their value. Although the value of gold that fluctuates, based on the fact that precious metals are rare elements there will always be some worth attached to them.

7. Falling for Confiscation Scare Tactics

Probably numerous buyers got the “Confiscation Myth” and inadvertently found themselves upsold into needless, expensive numismatic coins.

Most unscrupulous precious metals companies would trick investors to purchase numismatic coins with a margin sometimes up to %70 percent higher than regular bullion coins and bars.

The most widely used strategy for promoting high-priced coins is to lift the confiscation issue. Most telemarketers say investors are not “subject to confiscation,” of old U.S. gold coins, giving the illusion that new gold bullion coins are.

As a result, many investors are purchasing old, rare, and antique gold coins at prices substantially higher than their gold content. The concept of buying “non-confiscatable” gold feels like a compelling argument but fails to stand the test of truth when investigated.

Most precious metals firms maintain the “collectibles” are old U.S. gold coins, proof sets, and commemorative gold coins, which will be exempt from another gold recall. Some firms say at least 15% premiums automatically make collectibles of coins.

Another concept is that coins one hundred years of age or older are antiquities and are thus not subject to confiscation.

The fact of the matter is that those claims are backed by no federal legislation or Treasury Department regulation. 

8. Not making sufficient research

When we face something new we simply take advice from friends or a few sites. In the precious metals market, simplistic analysis merely looks at general details such as spot prices and tries to “pick a price point” or choose the most common forms to buy.

There is quite substantial information to be learned purchasing gold and silver and this often involves sifting through misinformation.

There are very good forums and blogs are available to read the opinions, strategies, and experiences of other investors they have had with particular dealers. Ask detailed questions about the sites, and mine experienced investors' expertise and experience.

You can use Facebook and LinkedIn to connect with the different investor groups. Bear in mind that most of these groups are built by dealers or individuals who have a hidden sales agenda.

Consider their profile and background before assessing any aspect of advice that may be given.

The mass media can always deliver timely, but at times distorted, news. Don’t give investment decisions based on the news. Also verify the same news with multiple credible outlets if they are important for you.

Finally following your initial research, find a dealer interested in spending time addressing any and all of your concerns without attempting to sell anything to you.

9. Going “All In”

Many first-time inventors of precious metal fall into the trap of investing all or a substantial portion of their resources in precious metals. It would be a failure! You should never allocate all of your assets in any one investment vehicle, or a small part.

In order to determine how much you should invest, first, you have to assess how much you can truly afford to invest and what your financial objectives are.

When deciding how much to allocate in precious metals you should start by pursuing some long-standing principles of investment.

When you have substantial debt, you will first strive to pay off your debt and accumulate money for three to six months of daily expenses. Once these principles are met then take a look at how much extra money you have on your side to invest.

A minimum initial investment sum may be needed to make certain forms of investments. Different dealers set different minimum purchase amounts. Your local dealer may not want to sell gold worth less than $10,0000 while some other dealer can sell an ounce of gold at once. 

Lastly, never go in debt to invest and never buy precious metals on leverage. Don't use funds planned to be spent for other necessities.

10. Getting highly obsessive

A simple Google search for “gold” or “silver” will bring millions of results. There is more information on the web that one individual can keep up with. 

Most new investors get quickly overwhelmed with the amount of available information. Especially when gold  hits new all-time highs. 

There's so many things evolving around the world all at once. It's easy to get excited and want to keep an eye on the market constantly. This gives new investors a false sense of power. They believe they will be on top of the world provided they constantly watch the market. 

What happens in reality is the complete reverse. Therefore relax and don’t get obsessed with the market. Consider giving yourself a mind of break sometimes.

If our minds are stressed, with a lack of regard about the consequences, we end up making high risk decisions.

At the time you return, it will still be there. You'll never miss a beat if you've done your homework, partner with a trustworthy organization to place your orders, and have a good long-term plan in place.

One approach to confirm you use a better approach is to prepare your actions ahead-be less reactive and more proactive. This gives you a real feeling of control, so you can calculate your strategy and wait for the right market.

The markets are moving as they should, but instead of responding to anything that needs you to watch the Hong Kong market to predict what's going to happen in London, you should pre-planning your movements.


Investment is a risky business but it can be very lucrative. Avoid uncertainties not to bring in other potential risks.

The key challenges we discussed here are just some of the more popular mistakes new investors encounter. By bearing in mind some of the important information that we revealed in this post, you can avoid the headache of these mistakes.

Understand above all that success is measured in years, not weeks. Avoid the mindset of getting rich fast following your ambitions and have long-term objectives.

Always, note that there's no substitute for knowledge and observation. Pick a system that makes some sense to you.

Don't just go along with anything because you were told it was successful. Instead, decide what aligns with your own body of information and experience, and then stick to your plan.

Finally, find a mentor who is ready to share the expertise that made them succeed. A good understanding of investing in precious metals is immensely valuable, giving you the potential for stable investment, financial stability, and independence.