The price of silver is rising; do I buy now?

Investing in gold and silver ― or stocks, bonds and pretty much anything actually ― has much to do with psychology. I don’t mean that you analyze people so as to find out what good investments there are. I am referring to the need to conquer yourself, to understand or at least cope with the mental processes going on up there, in order to invest wisely.

Many successful investors have times in their past to which they look back in regret, or at least the knowledge that they could have handled things better. They may have missed profits or missed opportunities, but it isn’t so much the imperfect knowledge or money involved that is regretted, but rather, the manner by which they dealt with this imperfect knowledge, that haunts even the best of investors. In spite of such regret, the important thing to them is that they deal with the memory as something educational, rather than as a judge of their personal worth.

The difference between a good investor and a typical one is attitude. There is a sense of humility they feel in the face of a market that is never 100% predictable. It is by inculcating such an attitude that one stops being merely reactive to market fluctuations, and invests strategically.

Without a strategic method of investing, one is liable to be beset with panic when the market goes in the opposite direction from that which one desires. Either they buy an asset at too high a bidding price, or they sell too low out of fear that prices will fall still further.

How does this relate to our discussion on investing in gold and silver? Amidst the rising price of gold and silver, one is bound to commit mistakes in fear that they would “miss the train,” that is, fail to buy the precious metals at a better price. Well, how does one deal with this circumstance?

Silver has been rising sharply (April 2011), much more so than gold, and it seems that if you don’t buy now, you will never have a chance to profit from investing in silver. Luckily, even the most profitable investments never rise in price in a straight line; there are always adjustments that occur, which is natural. The goal of one who wants to invest in precious metals is to take advantage of such corrections, so as to buy silver at the best price.

First, one must drop the notion or hope to be omniscient, a perfect seer who buys at the absolute lowest price so as to sell at the highest price. Even the best investors only have general ideas as to when it is best to buy and sell. They hedge against this lack of all-knowingness by creating a disciplined program of buying in portions, as opposed to rushing out to invest all their money in one fell swoop.

Because there is always the possibility that future corrections may not go below the present (rising) price, it might be a good idea to buy silver now. But again, do so in portions. For example, if you have $10,000 for your ‘silver fund,’ spend $2,500 or 25% to buy at the prevailing price. If silver’s price continues going up, you’ll be glad that you had bought some silver at a lower price. And if silver’s price drops, you’ll be glad that you now have the opportunity to buy at yet a lower price.

Chances are, a correction will be taking place not many weeks from the time that the price of silver shoots up at an incredible rate. When the correction occurs, this will be the time to buy more silver. Let’s say you spend another 50% or $5,000 of your silver fund; you have a remaining 25%, or $2,500, for buying in case the price goes even lower. And if the price of silver rises once more, and continues to rise, then you can be glad that most of your silver fund had already been spent for buying silver at a low price. From there, you wait for the next correction, and then buy with your remaining 25%.

This system may not bring you the best returns in comparison with someone who knows the future perfectly, but it will serve to minimize foregone profits, and maximize your buying opportunities. Most of all, by implementing a strategic method of buying, you are rewarded with a clear conscience and no ‘shoulda coulda woulda’ thoughts that eat their way through your brain.

So should you pounce on the opportunity to buy silver before the price goes further up? Yes, but with a strategy in mind. By buying in increments, you will have developed a healthy attitude towards investing in silver ― or investing in gold or stocks, for that matter. A prudent investor sleeps soundly at night, not because they’re more intelligent or prophetic than others, but because they have a plan and stick with it. Once you know and understand the long-term market conditions, and of why gold and silver are good investments in this climate, then you’ve already won half the battle.