Most people who have invested in gold or silver have certainly thought about this question. You have probably heard the advice of experienced and wise investors that you should buy from the “bottom” and sell from the “top”. Sounds nice and logical, but who can say when the bottom and when the peak is? Capturing these moments is extremely difficult, one might even say practically impossible. Even the most experienced investors and traders in the world can’t accurately time all the peaks and bottoms — so how can beginner and inexperienced retail investors do it?
The main question is, what is your goal when investing?
- Is it to protect your savings from inflation over a longer period of time (while maintaining your peace of mind)
- or to engage in “trading”, i.e. to constantly buy and sell, trying to hit short- and long-term bottoms and peaks?
My experience of the last ten years has shown that most people want to be investors, but in reality they deal with unsuccessful trading — they constantly monitor the charts and often sell at a lower price than they bought.
Greed and fear
Most people are emotional and less rational. Therefore, people and also markets are mainly driven by two emotions: greed and fear. Statistics show that the majority of (retail) investors make transactions that are driven by emotion, i.e. they buy at the top (greed) and sell at the bottom (fear). For example, if the price of gold starts to rise then after some time it will be written about in the media, upon which many people start buying gold. It is often the case that when the media speaks about investment topics, the price has reached its short-term “peak”, followed by a normal price correction, or a small drop, and retail investors, who get scared, sell their gold.
If your goal is to maintain peace of mind and protect your savings from inflation, it is wise to set aside at least 5–10% of your income every month and invest it in gold. For the purpose of long-term holding, it doesn’t matter what the price of gold is at the moment or what it does in the meantime — if your goal is to put money aside and protect it from inflation with gold, then keep it and don’t sell it (even if the price should fall) until there is a real need for it! On the contrary, if the price should fall, it is wise to buy more because it will lower the average purchase price (the term DCA or dollar cost average is used).
Summary: review your income and expenses, save money and keep it in gold, and don’t constantly check the price — it won’t change anything in the short period of time, if only it causes you more stress. If possible, buy more gold regularly and sell only when there is a real need for it. And remember that no one can perfectly time all the highs and lows, including the best and most experienced investors in the world.
Happy SWAN (Sleep Well At Night) investing!
Investor, founder and CEO of Aufort
P.S. This is not investment advice, but sharing my personal experience and thoughts.