The Psychology of Investing in Gold and Silver
Commodities / Gold and Silver 2013 Jul 15, 2013 - 02:23 PM GMTBy: Submissions
Simon Popple writes: Like all things in life, when investing having a high IQ is largely beneficial. It helps you to source the right information, analyse it and “know what to do”. Quite simple. But there’s a big difference between “knowing it right” and “doing it right.”
Prior to setting up my Capital Raising business several years ago I was a director at one of the World’s largest private property companies. On almost a daily basis I came into contact with many people who’d made tens of millions of dollars from real estate.
Were they incredibly bright? No
Did they know more about real estate than anyone else? No
So how come they were so rich?
They did it right – it’s all in the execution.
They had the right psychology.
Didn’t panic when the market went against them and even if on the odd occasion they might had a wobble, as real estate is such an illiquid slow moving asset, they had plenty of time to change their minds. Keep assets they might have sold and acquire those they were about to walk away from.
They all had convictions about various sector of the market which they stuck to, making a lot of money in the process.
Unfortunately Gold and Silver are markets where the very liquid nature of the product can and often does work against you. So when you get spooked into changing your mind, you hit the sell button and by the time you’ve come to their senses it’s too late. The trade’s gone through.
Despite recent IMF downgrades and some rapid back peddling by Bernanke, the general consensus seems to be that the world economy is recovering. Despite the facts strongly suggest otherwise. This sentiment of long dollar, short gold, US recovering has sent a herd of investors charging to the exits in the gold and silver. Clearly panicked by the collapse in price and paying little to no attention to their own analysis.
This very popular quote from Warren Buffet..........
“Be Fearful When Others Are Greedy and Greedy When Others Are Fearful”
...........largely being ignored.
But given the fundamentals of this sector, if there was ever a time to pay attention to Mr Buffet then now surely is the time.
We all know that the volatility can be stomach churning, positions moving dramatically on a daily basis. But whilst all this is happening the mines are still producing the gold (which you can’t print) and for every willing seller there’s a willing buyer.
Given the recent buying activity in Russia, China and India, it’s probably fair to say that many of these buyers won’t be sellers for a very long time. They can see the massive money printing going on and in many cases are far more familiar with poverty than we are. Buying gold and silver as insurance rather than as an investment. So much thicker skins than many of us. Volatility being an opportunity to back up the truck and buy more rather than panic and rush for the exits. Like some of their VERY WEALTHY real estate counterparts, they BELIEVE in the asset. KNOW why they are buying it and DOING it right.
Shall we call it, the right Psychology?
Simon Popple is the Managing Director of Brookville Capital (www.brookvillecapital.com), a capital raising business focusing on Agriculture and Gold. He’s also the Editor of Metals & Miners, a Newsletter run by Moneyweek (http://moneyweek.com/author/simon-popple/). He also works as the UK agent for SA Bullion which distributes Krugerrands from SA Bullion, South Africa’s largest gold refiner.
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