Newbie needs advice on strategy

[JOHNLGALT]

I've not really bought into the $150 ounce, or the $56k ounce, or the ounce of silver or gold to buy a house either. I do think there is plenty of room to move up from <$20. I have bought into the 'worst recession the world has ever seen' so silver and/or gold are to store value so we have something of value to trade for the stuff we need (if it comes to that) and we want to have less cash in the bank in case of a bail-in.

We're limited with what we can do with savings/cash. We don't know much about shares and believe there is a major crash coming and so we'll stay away from those. Crypto's are too volatile, I'll consider BTC when it gets under $100 which may be never. The choice seems to be gold and silver, for better or for worse.


Go big or go home you reckon?

Personal choice only, if you like pretty coins which in a SHTFan situation will be rendered to their actual silver content, then go ahead. Happy New year, & thanks for quoting my post. _JLG.

 

[SilverDJ]

I've not really bought into the $150 ounce, or the $56k ounce, or the ounce of silver or gold to buy a house either. I do think there is plenty of room to move up from <$20. I have bought into the 'worst recession the world has ever seen' so silver and/or gold are to store value so we have something of value to trade for the stuff we need (if it comes to that) and we want to have less cash in the bank in case of a bail-in.

I think metal will perform better than cash, but you'd be a fool to go all-in in metal.
The bail-in risk is borderline zero, I would not let that factor into your decision. Banks failing, yeah, small risk, but if that happens they won't bail-in other banks they'll raise taxes for a bailout.
But remember that both cash and metal produce no dividend (cash interest does to a small degree), and you have probably another 20 years on average to grow that money. Compounding does a lot over 20 years.

We're limited with what we can do with savings/cash. We don't know much about shares and believe there is a major crash coming and so we'll stay away from those.

That's what index funds are for, makes it easy. For example, here in Oz I have VHY which is a high yielding investment fund index that pays a dividend every quarter. Over say 20 years that's 80 compounding dividend payments. Metal would pay zero over that same period.
By all means stash your money into a mix of cash and metal for a few years, and when the crash happens have a plan to buy into property and/or shares that produce an income for your retirement.
The best thing you want in your requirement is money coming in constantly (dividends, rent, interest), not hoping that metal continues to go up to compensate for the zero income from elsewhere.

Go big or go home you reckon?

Not in your 60's, don't be a fool, go safe.

 

[Glenis]

I think metal will perform better than cash, but you'd be a fool to go all-in in metal.
The bail-in risk is borderline zero, I would not let that factor into your decision. Banks failing, yeah, small risk, but if that happens they won't bail-in other banks they'll raise taxes for a bailout.
But remember that both cash and metal produce no dividend (cash interest does to a small degree), and you have probably another 20 years on average to grow that money. Compounding does a lot over 20 years.

10 - 20% in metal - over and above the house is the plan. I wouldn't be so certain on banks failing - look at Deutsche Bank. All bank stocks have taken a hammering on the stock market this year. Aussie banks profitability must have decreased since they started implementing better lending practices. In NZ we have a very clear bail in clause.

That's what index funds are for, makes it easy. For example, here in Oz I have VHY which is a high yielding investment fund index that pays a dividend every quarter. Over say 20 years that's 80 compounding dividend payments. Metal would pay zero over that same period.
By all means stash your money into a mix of cash and metal for a few years, and when the crash happens have a plan to buy into property and/or shares that produce an income for your retirement.
The best thing you want in your requirement is money coming in constantly (dividends, rent, interest), not hoping that metal continues to go up to compensate for the zero income from elsewhere.

I've looked at index/EFT funds but I'm inclined to get in later, maybe 6 months, after I see what the markets will do. Lot's of negatives and IMO, things will get worse temporarily at least. https://smartshares.co.nz/fund-investor-report

I'm under no illusion of metals going up, that would just be a bonus.

Not in your 60's, don't be a fool, go safe.

By "Go Big" I was referring to buying 1kg bars rather than 1 oz coins.

 

[Alloy]

I'm about to start stacking but we're starting late. We're in our 60's but not quite old enough to get a pension/superannuation. Mortgage paid, no debt. Cash in the bank and we're thinking it's a silly place to keep it given the current turmoil in the world. The purpose of stacking is to retain the value of savings should financial systems go belly-up. I'm thinking of bubbles bursting and bank bail-ins. Because of our age, being able to sell quickly and easily is a major consideration should we need it in a hurry.

The plan so far is a goal of 3,000 oz silver and 60 oz gold. I think that is sizeable enough to cover a SHTF situation to protect us and family - short term at least. At current rates that's about $200k NZD, we don't have that amount but can expect an inheritance within a 5 year period, but we can start building a stack now. However, when I started looking at the weight 3,000 oz silver is 85 kgs and I can't see a couple of oldies hefting that in backpacks and heading for the hills in a SHTF situation LOL We might split it into 3 or 4 parcels - family can cart their own. Thoughts?

I'm leaning towards sliver coins; silver eagles, maples, Britannia and a Aussie coin. I consider these to be the most recognisable and therefore easiest to liquidate. I'll also buy a few 10oz silver bars. For gold - majority in 1 oz coins and some smaller weights in recognisable bars (Perth mint or Pamp).

Am I on the right track?

I strongly advise diversifying both outside precious metals and within precious metals. What I mean by the latter is that I wouldn't have all your gold and silver physically in hand in your house or something. Physical carries higher premiums, shipping costs, and risk of theft. And no, you're not going to be lugging a bunch of silver and gold around in a SHTF situation. The vast majority of people don't have any silver or gold, so it's not going to be a currency in a SHTF situation. Currency is going to be clean water, food, prescription and OTC medications, fuel, ammunition, etc.

But getting back to my original point, buy some physical but also buy some allocated metal at Bullion Vault. As far as I know, they've got the lowest prices for gold and silver (and platinum I think) on the planet. They really wrung out some costs and achieved something remarkable – their fees are way lower than what I was used to, well below 1%. They're audited regularly, which is a firm requirement I have for any allocated or vaulted metals outfit. (If you end up opening an account there, you can support my research by using this link.) They've got a few different vaults around the world.

In any case, be ruthless about prices and premiums over spot. Don't overpay. So many people do, for reasons I don't understand.

 

[SlyGuy]

you don't know my mother

Correct.

But you do not know exactly when she'll die, if the will papers may get changed before death, if doctor bills and end-of-life cares will cut her net worth in half, how long the money will be tied up with attorneys once she dies, the fees which taxes and attorney will whittle out of it, whether other family could challenge the distributions, etc. There are many "X" factors there. You never want to "expect" things.

I think there is an old saying that wise men count each of their eggs as chickens, expect zero failure to hatch and also expect 0% infant mortality of chicks. Or something

When and if you obtain that amount of inheritance, metals may or may not be the best investment (depending on your portfolio allocation, stock market conditions, spot prices, etc etc etc at that future time). You will probably just want to distribute it into whatever sector of your portfolio makes the most sense at that time. However, by spending it in your mind right now, you are making the same mistake which people make buying things on credit while assuming they will keep getting job promotions, that the stock market will keep going up, etc. It might work out, but it can blow up in your face also.

...In any case, be ruthless about prices and premiums over spot. Don't overpay. So many people do, for reasons I don't understand.

Yes, this is always good advice. You are buying a commodity, not a collectible. Get nice looking coins or govt coins or nice bars if they are the same price or only a hair more than ugly ones. Expect it all to sell for spot when you get rid of it later, though. Don't overpay on the front end. Don't fall for the marketing of the art or the limited edition or brand name or bla bla bla. Get whatever is decent looking and liquid and at spot or very close.

...Best of luck with whatever you decide on. General recommendations I'd use for anyone who stacks physical PM are max of 500-1000oz of silver and the rest in gold (due to weight and liquidity, easier to hide and easier to transport, usually easier to sell)... and PMs no more than roughly 10% of your portfolio (since slow/no growth most times... store of wealth only unless you get very lucky on timing). As mentioned above, SHTF is highly unlikely and PM wouldn't be the currency. If SHTF occurred, you'd want a bit of stored food and water to ride it out... or compact wealth to get outta there. For that, a $25,000 USD pocket full of gold coins weighing 20oz sure beats the wagon load of over 50kg of silver that would have the same value. GL

 

[SilverDJ]

Physical carries higher premiums, shipping costs, and risk of theft. And no, you're not going to be lugging a bunch of silver and gold around in a SHTF situation. The vast majority of people don't have any silver or gold, so it's not going to be a currency in a SHTF situation. Currency is going to be clean water, food, prescription and OTC medications, fuel, ammunition, etc.

Absolutely.
I'd recommend an unallocated (usually no fees) or allocated metals fund with the most reputable local provider in NZ. The buy/sell spread is much lower than physical, it's safer, trivial to move between gold and silver as circumstances change, and it's trivial to sell when you see an opportunity elsewhere. You can also set up automated systems to buy or sell. So much more flexible than physical.

 

[SlyGuy]

Absolutely.
I'd recommend an unallocated (usually no fees) or allocated metals fund with the most reputable local provider in NZ. The buy/sell spread is much lower than physical, it's safer, trivial to move between gold and silver as circumstances change, and it's trivial to sell when you see an opportunity elsewhere. You can also set up automated systems to buy or sell. So much more flexible than physical.

I get that this is a way to trade spot prices on a short term basis, but why do metals at all then? Why not just do more stocks? Or why not trade oil or soybeans or wheat? There are many more choices among stocks and you get dividends and covered calls (which means you have increased probability of profit... slight win if price stays basically even due to cash flow).

When you use silver unallocated, ETFs, mining stocks... you're basically just turning it into another commodity stock, no? You are aiming more for capital gains than store of wealth. You just buy them, set limit orders, get tax statements, depend on the bank or exchange, etc. I realize it is infinitely more convenient, but in exchange, paper metals defeats nearly every advantage PMs can give you when you hold them physically:

...I always view PM as compact wealth preserve with little or no counter-party risk... and cough cough tax and inheritance advantages. You lose all those things with paper metals.

I can't imagine it is a weight or volume problem? Even if I had $10Mil and wanted 10% of my wealth in gold, $1M USD in gold is only about 800oz... basically 25kg and shoe box size if coins... or you could even get two 12kg standard bars not much bigger than a cans of soda.

 

[SilverDJ]

I get that this is a way to trade spot prices on a short term basis, but why do metals at all then? Why not just do more stocks? Or why not trade oil or soybeans or wheat? There are many more choices among stocks and you get dividends and covered calls (which means you have increased probability of profit... slight win if price stays basically even due to cash flow).

Because it's an easy equivalent to cash whilst diversifying into the metals asset class.

When you use silver unallocated, ETFs, mining stocks... you're basically just turning it into another commodity stock, no?

Depends on how you look at it.
Allocated is the same as you owning the gold yourself legally, but just having someone else securely store it whilst paying lower fees, and have the flexibility to sell and convert on a whim.
You can think of the unallocated as the same thing if you want, just less legal "ownership".

You are aiming more for capital gains than store of wealth. You just buy them, set limit orders, get tax statements, depend on the bank or exchange, etc. I realize it is infinitely more convenient, but in exchange, paper metals defeats nearly every advantage PMs can give you when you hold them physically

That's what allocated is for, you legally own it and can even go into their storage facility and fondle your allocated serial number bar.

...I always view PM as compact wealth preserve with little or no counter-party risk... and cough cough tax and inheritance advantages. You lose all those things with paper metals.

Nope, not a thing. Again, this is what allocated is for, you own it, just like buying it in a shop and storing it in safe deposit box.
If you don't understand this advantage then I encourage you to research the legalities of allocated metals.
Many places will even have deals with local private vaults and will physically transfer the metal to your own SDB inside the private vault.
This gives you every single advantage of holding yourself, but the flexability to buy/sell/swap more conveniently and at lower spreads.

I can't imagine it is a weight or volume problem? Even if I had $10Mil and wanted 10% of my wealth in gold, $1M USD in gold is only about 800oz... basically 25kg and shoe box size if coins... or you could even get two 12kg standard bars not much bigger than a cans of soda.

Nope, it's not about weight, it's about flexibility.
What happens if the market changes, or your life circumstances change and you need to sell all that physical metal you have buried in your backyard?
Good luck trying to sell that much in onesies and twosies on the forum , ebay, or at the local dealer who will give you a crap rate.
Good luck if you decide to change your gold/silver holding ratio.

My Buy/Sell spread is 0.4% on gold at the Perth Mint. Good luck getting anywhere close to that when you hold it yourself.
At any time I can convert my unallocated (zero storage fees) to fully allocated for a small baring charge. And I can have my allocated metal delivered at any time with the click of a mouse, and can liquidate it all to cash just as easily. I have full legal ownership of it, and it's government guaranteed.

 

[Alloy]

I get that this is a way to trade spot prices on a short term basis, but why do metals at all then? Why not just do more stocks? Or why not trade oil or soybeans or wheat? There are many more choices among stocks and you get dividends and covered calls (which means you have increased probability of profit... slight win if price stays basically even due to cash flow).

When you use silver unallocated, ETFs, mining stocks... you're basically just turning it into another commodity stock, no? You are aiming more for capital gains than store of wealth. You just buy them, set limit orders, get tax statements, depend on the bank or exchange, etc. I realize it is infinitely more convenient, but in exchange, paper metals defeats nearly every advantage PMs can give you when you hold them physically:

...I always view PM as compact wealth preserve with little or no counter-party risk... and cough cough tax and inheritance advantages. You lose all those things with paper metals.

I can't imagine it is a weight or volume problem? Even if I had $10Mil and wanted 10% of my wealth in gold, $1M USD in gold is only about 800oz... basically 25kg and shoe box size if coins... or you could even get two 12kg standard bars not much bigger than a cans of soda.

What SilverDJ said, and on your last point, the OP said he wanted more than 3,000 ounces of metal.

Bullion Vault is physical, just somewhere else. And cheap, like 0.01% per month last time I checked.

 

[Alloy]

Absolutely.
I'd recommend an unallocated (usually no fees) or allocated metals fund with the most reputable local provider in NZ. The buy/sell spread is much lower than physical, it's safer, trivial to move between gold and silver as circumstances change, and it's trivial to sell when you see an opportunity elsewhere. You can also set up automated systems to buy or sell. So much more flexible than physical.

But why NZ? It will be more expensive than Bullion Vault right? I think Gold Money or Schiff came close, but no one beat BV's prices last time I checked: 0.01% per month. After the Monex scandal, I'm just on some kind of crusade of telling people not to overpay for precious metals. So many people overpay. In the US, they buy from APMEX, which makes no sense. And using a NZ provider makes no sense to me if they cost more than someone else, whether it's BV, Schiff, or whomever. It's not like the gentleman needs to visit the vault.

(It's actually possible BV has a vault in NZ, but I doubt it. I think the closest would be Hong Kong or Singapore, but it should be irrelevant. I like their Swiss vault for purely romantic reasons.)

 

[SilverDJ]

But why NZ?

Just because most people feel safer having it in their own country. You can of course use overseas if you want, or both.
Local would also be easier to get hold of your allocated metal if the company fails, or for legal matters if it came to that.

It will be more expensive than Bullion Vault right? I think Gold Money or Schiff came close, but no one beat BV's prices last time I checked: 0.01% per month.

I don't know about BV, but if they are much cheaper my first question would be, why are they cheaper?

 

[Alloy]

Just because most people feel safer having it in their own country. You can of course use overseas if you want, or both.
Local would also be easier to get hold of your allocated metal if the company fails, or for legal matters if it came to that.

I don't know about BV, but if they are much cheaper my first question would be, why are they cheaper?

I see your point about risk of failure, legalities, etc. On the flip side, many people don't think where they live is optimal on these dimensions, and would rather have their gold in a more favorable jurisdiction, like Zurich, London, etc.

As to why they are cheaper, the short answer seems to be volume and ruthless discipline. They have a lot of explanatory material on their website that digs deeper into why their prices are so low. They claim, and as far as I know they are right, that they're the cheapest way to own gold, period. It's all good delivery bars, so that helps. But they have a lot more to say about it on their site.

Hmmm...if it's all good delivery bars, is that still "allocated", or is it just "vaulted"? You can buy ounces, fractions of a bar, obviously. Does allocated have to be discrete, separate metal ingots?

 

[SlyGuy]

[unallocated storage] is physical, just somewhere else...

That is the definition of counter-party risk.
That storage facility is prone to any number of problems which you have no control over.

Because it's an easy equivalent to cash ...

Yes, this is the main advantage I see.

I would love to have most or all of the cash portion of my stock account moving with gold spot price instead of just doing nothing except collecting nominal interest. Whenever I have a lot of cash on the sidelines of the market, I'm usually expecting a good time for gold. However, the only way I've found to do that is buying ETFs like GLD and IAU and SLV through my stock account (which I typically don't do because of fees, which are mainly due to taxes on the funds, and the fact that they don't correlate well enough to spot PM prices).

...can have my allocated metal delivered at any time with the click of a mouse, and can liquidate it all to cash just as easily. I have full legal ownership of it, and it's government guaranteed.

If I were to buy unallocated, that would obviously move in value with gold, but then the money is still in a different account than the account(s) I use to buy stocks... so it defeats the purpose of having that buying power ready. There is no point I can see to buying unallocated, profiting (or losing) in that account, and then taking most or all of the money out to put into a stock account. It seems too slow and laden with fees (especially when most retirement accounts have tax penalties for pulling cash out... and limits for putting cash in).

 

[SilverDJ]

I see your point about risk of failure, legalities, etc. On the flip side, many people don't think where they live is optimal on these dimensions, and would rather have their gold in a more favorable jurisdiction, like Zurich, London, etc.

Sure, people need to weight up their own circumstances.

As to why they are cheaper, the short answer seems to be volume and ruthless discipline. They have a lot of explanatory material on their website that digs deeper into why their prices are so low. They claim, and as far as I know they are right, that they're the cheapest way to own gold, period. It's all good delivery bars, so that helps. But they have a lot more to say about it on their site.
Hmmm...if it's all good delivery bars, is that still "allocated", or is it just "vaulted"? You can buy ounces, fractions of a bar, obviously. Does allocated have to be discrete, separate metal ingots?

No, you can own part of an allocated bar, and I'm sure this is how BV get such low rates.
The term "Fully allocated" usually means you are the sole owner of that bar, usually based on a serial number if it's big enough. e.g. a 1oz gold bar would usually be serial numbered, but a 10g bar may not be.
This legally makes you the sole owner of that bar. If the company goes bust and the receivers move in, they cannot touch your bar because they don't own it, it is not on their asset books. So you can just walk in, prove who you are and take your bar, job done.
If you own an "allocated" "good delivery" bar (400oz) , then you obviously only own part of that bar (unless you have half a million invested). It would be the same legally, the company or the receivers cannot touch it, but you can't just walk in there and demand your bar, because they can't just cut it up. So it gets legally complicated.

The terms "allocated" and "fully allocated" may be often confused, or simply not used in the same way.

 

[SilverDJ]

That is the definition of counter-party risk.
If I were to buy unallocated, that would obviously move in value with gold, but then the money is in a different account than the ones I can buy stocks... so it defeats the purpose of having that buying power ready.

Sure, but it's only a day or two away for the transfer. Usually market buying circumstances aren't that urgent.

There is no point to buying unallocated, profiting (or losing) in that account, and then taking most or all of the money out to put into a stock account. It seems too slow and laden with fees (especially when most retirement accounts have tax penalties for pulling cash out).

Sure, buying and selling metal in any form is not free. If you want you "cash" to move with metal prices, then you have to pay a fee for that privilege.

 

[SlyGuy]

...Sure, buying and selling metal in any form is not free. If you want you "cash" to move with metal prices, then you have to pay a fee for that privilege.

Yes, I guess this is the bottom line. There seems to be no perfect system.

I think the disadvantage to market stuff like GLD and SLV is taxes and expense ratio limiting your gains... and imperfect correlation. Those outweighted the simplicity of being in the same stock account (for me anyways).
While unallocated has lower fees and nearly perfect correlation, but you need a separate account from your stocks account (with huge minimums in the unallocated to get best fees). That is the deal breaker IMO.

Interesting food for thought, though. I might look into unallocated metals current fees and rules for accounts again sometime. You are pretty lucky that the Aus/NZ accounts need only about 10% of what USA accounts need to get minimal fees.

 

[Glenis]

Thank you SlyGuy, SilverDJ and Alloy. There's a lot to think about.

I'd hate to be part of a SHTF scenario and I think it relatively low risk, but I can't just plan for the 'best' possibility either. I don't plan to be heading for the hills lugging silver, but plans change. We'd rather stay put because own our home, have drinkable fresh water on our door step, we garden, we make alcohol, we fish, we have other skills to barter, we hold a different asset (something akin to a gemstone), we have very few potential dependants that may look to us for support, we have 4 other areas in NZ we can bolt to if required.

I believe we need to diversify and gold and silver is part of that, 10% to start, maybe up to 20%, although being flexible and not getting emotionally invested is important too. How that is made up is why I asked the original question. 24 hours ago I was thinking 1 oz government issued silver and gold coins and a few silver bars spread over 3 physical locations. Now I'm thinking about 30%-50% following the original plan but also unallocated, in NZ and outside NZ. I had looked at GoldMoney.com but wondered if it was going to be a pain in the arse setting it up since there seems to be a lot of hoops to jump through but it does seem to have some flexibility.

BTW - I'm a SHE not a HE. I thought the cute kitty might imply that - should have picked a busty superwoman - then again look at SlyGuy's avatar

 

[SilverDJ]

Interesting food for thought, though. I might look into unallocated metals current fees and rules for accounts again sometime. You are pretty lucky that the Aus/NZ accounts need only about 10% of what USA accounts need to get minimal fees.

Surely there has to be someone, somewhere in the US that has no or a low minimum?

 

[jultorsk]

BTW - I'm a SHE not a HE. I thought the cute kitty might imply that - should have picked a busty superwoman - then again look at SlyGuy's avatar

This much was evident from the get-go. Glad you don't let a bit of "tone-deafness" get to you Great to see a new, active member on the forum.
It's interesting, as NZ seems to be the SHTF safe haven country of choice for multimillionaires and even Kim Dot-com... I do like the odds of survival better in NZ than in most other countries, with or without silver/gold. Your skills & resources set seem excellent, and plan A of staying put with your tribe is logical. I think you can teach a thing or two to us, rather than the other way around...
My two cents: gold. Global demographics is going that way.

 

[SilverDJ]

I believe we need to diversify and gold and silver is part of that, 10% to start, maybe up to 20%, although being flexible and not getting emotionally invested is important too.

I think that's a big thing people often get caught up in (guilty), especially in the stacker community.
They want to stack and stack and stack, waiting for the moon shot, some mythical SHTF scenario, or just for the sake of stacking, without giving thought to what the smart investors do.
Sure have some physical metal for whatever and never touch it, but if SHTF then you really aren't going to need much.
Having large sums tied up in metal or any other asset class and then just leaving it there, without ever reevaluating the market and what's going to happen down the track may not be the best approach.
Getting emotionally attached to an asset class means you might not be willing to sell it when you really should sell it. Or you might not buy when you really should buy. Every asset you have (or percentage allocations) should always be open for re-evaluation.

For example, the other year I sold all my unallocated metal because I saw an opportunity elsewhere, and now I've been building it back up again in the last 6 months, once again, ready to move if something else comes along.

On the flip side, having physical metal (or another non-liquid asset like a property) that is hard to sell can be a good thing for those who are impulsive and lack discipline etc, it might save you making an impulsive mistake.

It's like the old Lotto winnings thing, best thing you could do is lock away 80% or something of it so it's hard to get back out.