Friday, March 2, 2012

Keeping My Emotions in Check

I am extremely bullish on silver. My research tells me that 2012 is going to be a good year for the white metal, not that it matters but my gut tells me the same(never invest because your gut tells you). We are investing in silver and I personally believe that it is going to be one of the best investments not only in the next 5 years but might be the best investment opportunity in my lifetime. Only time will tell, and it will be fun to look back and see this statement, because overall that is a pretty bold statement for someone in their 30's, and hopefully I will have a long life ahead of me.

We started looking into silver in 2008 when the price pulled back strongly to around 8-10 dollars. I watched it for six months regularly as it climbed up to $16. While I was watching the price I was doing research on the fundamentals of it. I was was also looking into the best way to purchase and store it. We finally pulled the trigger at the end of 2009 at around the spot price of $18, at this point I felt confident that it was worth putting some money into.

Over the last couple of years with investing in the PM market, I have done my due diligence and spent many countless hours studying and double checking the fundamentals to make sure that I/we had made the right decision.  All you hear is that silver is volatile and its for speculators(which it is), but you never hear the fundamentals. During this time not only have I confirmed that I have made the right decision, but that I believe in it more than when I initially looked into it.

During the last two years, we have been dollar cost averaging and not trying to time the market, just regular accumulations of the metal each month, no matter the price. I believe I have a done really good job keeping my emotions in check with not worrying about the price but focus on purchasing it not matter the price and knowing that in the next few years trying to save 2-5 dollars per oz isn't going to matter.

We are now sitting in a good spot with our investment now and have our core position. I believe with the market swings, that I can start to play this investment a bit different. I believe that we can stop buying every month and save some cash for when the price swings to the downside. Then we can pick up some more at cheaper prices...or buy the dips. We still want to purchase more, I would love to purchase all the way up to around $50. I will re-asset once the price hit that mark.

Last year we saw a run up in silver from around $28 to $48 dollar over the summer and then back to finish around $28 at the end of the year. We purchased at $28 and also at $48, which overall, doesn't matter, because we also purchased at $18 and other prices during the last two years.

So far this year, the price started at around $28 and so far it's around $36 around 30%, and honestly its hard to watch the price going up and not think that you have missed the boat.  I follow some blogs that follow the metal hourly and daily, most of the people on these blogs are as bullish, if not more bullish than myself. It is funny to read the comments about the price movements. You can  start to see this timing the market mentality and I am surely guilty of it (reason of this post).


Before I could finish this post, Wed, around 10am Silver dropped from around 37.50 to under 34 which is over 7% drop. This was exactly what I was talking about, silver had been on a tear since the beginning of the year(up 30%). The 2011 ending for silver, everyone seemed defeated and some even seemed bearish on the overall trend(including me). Now the night before(Tuesday) everyone on these blogs thought they had missed the boat and that silver was going to the moon without pulling back and taking a breather. I remember telling myself that I just need to relax and let the price come back down.

Anyways, I just need to remain level headed and keep my emotions in check. We have our core position and I think that we will be well rewarded come one, two, three, etc..years down the road. A lot can change during this time and I will be watching very closely and seeing if the fundamentals change or if it is time to move our money into something that is more undervalued than silver.

I have seen how the market trade on greed and fear, and experienced it first hand.

Here is a great presentation from David Morgan on silver: