Dollar-Cost averaging is the most powerful method of building a substantial precious metals portfolio.
As advocates of investing in physical precious metals, we believe that slow and steady wins the race. Investing is a life-long journey and in our view should be treated accordingly. While some may have the financial wherewithal to purchase large quantities of gold, silver and other precious metals in a single transaction, the majority of those who own significant amounts of precious metals built their holdings over a long period of time. As the saying goes, “Rome wasn’t built in a day.”
How did they do it?
By dollar-cost averaging…
For those of you not familiar with this phrase, allow us to explain.
Over time, precious metals prices fluctuate. Prices may be up one day and down the next. Similar fluctuations may be seen on a weekly, monthly or even yearly basis. The key, however, is the long-term trend.
This is no different than a dividend-paying stock or the price of a bushel of corn.
The idea behind buying physical precious metals is to acquire as many ounces as you reasonably can. That being said, sometimes you may buy when prices are relatively expensive and sometimes you may buy when prices are relatively cheap. The strategy is quite simple and goes like this:
If prices are rising, buy more gold or silver.
You might be thinking to yourself right now: “That’s great. Buy when prices are higher and buy when they are lower.
What’s the catch?
The Catch is this: By purchasing gold or silver on a regular basis regardless of price, you may be able to lower your overall cost basis.
Allow us to explain…
If you buy 100 ounces of silver at a price of $16 per ounce, your cost basis is $16. Now, let’s assume that silver dips down the $14 per ounce and that you then purchase another 100 ounces at $14 per ounce. Your overall cost basis is now $15 per ounce
Now let’s further assume that silver prices dip down to $10 per ounce and you purchase another 100 ounces. At this point, your overall cost basis is now at $13.3 per ounce.
Now let’s assume that silver has a significant rally and is at $20 per ounce. You elect to buy another 100 ounces. Your overall cost basis stands at only $15 per ounce.
Buying silver at regular intervals allows one to dollar-cost average and potentially lower overall cost basis.
There are some important considerations to consider when it comes to dollar-cost averaging:
- Commitment: You must commit to buying gold or silver at regular intervals regardless of price. Prices go up, prices go down. If the goal is to get as many ounces as possible, it really doesn’t matter. Making the commitment to buy at regular intervals will allow you to potentially take advantage of any dips in price.
- Patience: We believe strongly in the long-term prospects for precious metals like gold and silver. While these metals could potentially see a rapid and explosive move higher in price, they could also move sideways or trend higher for long periods at a time. Dollar-cost averaging is a long-term investment plan and should be viewed within that context.
- Capital: To make the most of a dollar-cost averaging strategy, you must have capital available to purchase precious metals. While more capital can buy more metals, many precious metals investors have built significant gold or silver holdings by purchasing amounts they could afford on a regular basis and sticking to their plan. At $15 per ounce currently, $200 per month budgeted towards silver will get you over 13 ounces of silver per month. After a year, you’d have over 150 ounces of silver.
If you already own gold or silver, or want to begin building your holdings, right now is a great time to purchase.
Silver has fallen over 60 percent from its all-time-high, while gold prices have fallen over 40 percent.
Talk about an opportunity to dollar-cost average…
Don’t wait for prices to rise or head back to all-time-highs. Take advantage of these “sale” prices while you still can. Speak with an Advantage Gold account executive today. Our executives will guide you through the purchase process and can assist you in setting up a precious metals IRA to put your retirement capital to work in gold or silver. Don’t wait. Call us today at 1-800-341-8584.