Doing the Math when buying Silver:
Well, I've gone through the strategies for buying silver, now it's important that I mention the strategy of the math. Similar to "Dollar Cost Averaging" when investing in your 401k and IRA's, it's just as important when buying precious metals. And remember, as I've mentioned a number of times, TIME must be on your side. You could realize great profit potential in a matter of weeks; but it could also take you months or even years. But in the end, you will make money.
The biggest thing to remember, as I've mentioned before, is that except for buying 90% pre-1965 U.S. coins, it is almost impossible to buy silver AT Spot Price. The coin dealer or wherever you are buying from, is going to want to make a profit. That's acceptable, but you have to know how much and when to buy the silver. Obviously, the amount of money you want to spend and how much silver you want, is going to play a big factor. I'm going to present a hypothetical 4 week scenario, based off of real life silver prices.
Based on the chart below, you'll see that the low was $30.91 and the high was $34.28. Assuming you bought 1 oz generic rounds, the price would be about $1.50 per ounce more than spot. So, let's assume that you bought 10 ounces per week for 5 weeks, and you bought 2 times a week. The prices I put in, will include the $1.50 markup.
Nov 5: 5oz @ $32.41 / Nov 8: 5oz @ $32.85 / Nov 12: 5oz @ $34.10 / Nov 15: 5oz @34.00 /
Nov 19: 5oz @ $34.20 / Nov 22: 5 oz @ $34.90 / Nov 26: 5oz @ $35.50 / Nov 29: 5oz @ $35.30
Dec 3: 5oz @ $34.70 / Dec 4: 5oz @ $34.80
That averages out to $34.27 that YOU PAID for 5 weeks of silver buying; 2 times per week; total purchase of 50 ounces of silver. Total Cost out of your pocket: $1,713.50. Current value: (Spot as of the moment I'm writing this is hovering around $33.00. Value=$1650.00
So that means you are approximately $63.50 down at the current time. DON'T BE DISCOURAGED!!! Remember; we have to make make the initial investment from the premium ($1.50 mark up) that the dealer needed to make for their profit. Also, this chart could have just as easily be heading straight down like it did the month before in October. But that's the first 5 weeks. The next 5 weeks is what's going to matter. But what matter most is that it won't necessarily be 5 CONSECUTIVE WEEKS. What do I mean???
This is why you need a spreadsheet. The average price you've paid is now: $34.27. You need to now be READY to buy silver at a moment's notice. You aren't going to buy on a regular basis. If the price continues down, and the price of silver + the premium, is LESS than your current AVERAGE price you've paid, then you definitely want to buy some. You've already spent 5/10th of the 10 week purchasing we originally planned for (As I mentioned in my first couple posts). So split your other 5/10th just like you did the first 5 weeks into 10 buying days. Like I said, if the spot price + premium is less than your average price spent, then buy on that day one of those buying slots. Now, you'll have a NEW price average. If an entire week goes by and the price isn't below your average price spent, you need to buy 1 buying slot some time that week. WHY??? Simply, the price might be heading upward, and you'll be buying below TOMORROW's price. The goal is for your average price to be lower than the price to sell back.
Next post, I'm going to show the math that makes buying Pre-1965 90% silver U.S. coins a GREAT DEAL and how you can basically buy them @ Spot Price. CYA: SE
Here's a chart of the month of November 5 2012 through December 2 2012:
Well, I've gone through the strategies for buying silver, now it's important that I mention the strategy of the math. Similar to "Dollar Cost Averaging" when investing in your 401k and IRA's, it's just as important when buying precious metals. And remember, as I've mentioned a number of times, TIME must be on your side. You could realize great profit potential in a matter of weeks; but it could also take you months or even years. But in the end, you will make money.
The biggest thing to remember, as I've mentioned before, is that except for buying 90% pre-1965 U.S. coins, it is almost impossible to buy silver AT Spot Price. The coin dealer or wherever you are buying from, is going to want to make a profit. That's acceptable, but you have to know how much and when to buy the silver. Obviously, the amount of money you want to spend and how much silver you want, is going to play a big factor. I'm going to present a hypothetical 4 week scenario, based off of real life silver prices.
Based on the chart below, you'll see that the low was $30.91 and the high was $34.28. Assuming you bought 1 oz generic rounds, the price would be about $1.50 per ounce more than spot. So, let's assume that you bought 10 ounces per week for 5 weeks, and you bought 2 times a week. The prices I put in, will include the $1.50 markup.
Nov 5: 5oz @ $32.41 / Nov 8: 5oz @ $32.85 / Nov 12: 5oz @ $34.10 / Nov 15: 5oz @34.00 /
Nov 19: 5oz @ $34.20 / Nov 22: 5 oz @ $34.90 / Nov 26: 5oz @ $35.50 / Nov 29: 5oz @ $35.30
Dec 3: 5oz @ $34.70 / Dec 4: 5oz @ $34.80
That averages out to $34.27 that YOU PAID for 5 weeks of silver buying; 2 times per week; total purchase of 50 ounces of silver. Total Cost out of your pocket: $1,713.50. Current value: (Spot as of the moment I'm writing this is hovering around $33.00. Value=$1650.00
So that means you are approximately $63.50 down at the current time. DON'T BE DISCOURAGED!!! Remember; we have to make make the initial investment from the premium ($1.50 mark up) that the dealer needed to make for their profit. Also, this chart could have just as easily be heading straight down like it did the month before in October. But that's the first 5 weeks. The next 5 weeks is what's going to matter. But what matter most is that it won't necessarily be 5 CONSECUTIVE WEEKS. What do I mean???
This is why you need a spreadsheet. The average price you've paid is now: $34.27. You need to now be READY to buy silver at a moment's notice. You aren't going to buy on a regular basis. If the price continues down, and the price of silver + the premium, is LESS than your current AVERAGE price you've paid, then you definitely want to buy some. You've already spent 5/10th of the 10 week purchasing we originally planned for (As I mentioned in my first couple posts). So split your other 5/10th just like you did the first 5 weeks into 10 buying days. Like I said, if the spot price + premium is less than your average price spent, then buy on that day one of those buying slots. Now, you'll have a NEW price average. If an entire week goes by and the price isn't below your average price spent, you need to buy 1 buying slot some time that week. WHY??? Simply, the price might be heading upward, and you'll be buying below TOMORROW's price. The goal is for your average price to be lower than the price to sell back.
Next post, I'm going to show the math that makes buying Pre-1965 90% silver U.S. coins a GREAT DEAL and how you can basically buy them @ Spot Price. CYA: SE
Here's a chart of the month of November 5 2012 through December 2 2012:
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