Thursday, April 19, 2012

Investing Misconceptions (gold, silver, dividend)

I have spent many hours looking for great investments and trying to find why some investments are better than others. My first investment as I was growing up was some 1992 silver eagles 1oz coins. I bought these after working with my dad and mom. I would wake up and help him deliver newspapers before school.  I was only 11 but my grandfather and grandmother always told me to buy silver because it was a great way to save. The key word being SAVE.

Moving forward I never really had a mentor to guide me with investing. I learned of who exactly Warren Buffett was when I was stationed in Omaha Nebraska while I was in the Air Force. I started investing in stocks young but other things stopped me from really spending time to understand investing. 

During the Crash of 2008 everyone who gave advice to us in the Air Force were saying now is NOT the time to buy. This was true as few people bought anything. When asking most people they said they have sold to not lose anymore money.  I was 26 and put some money into Coke (KO), and ConocoPhillips (COP). Looking back I'm happy I didn't sell. I also bought some gold and later sold it.


The quick rise in Silver and Gold after 2008 was not a surprise to me as that is why I was buying it. But the problem is with silver and gold to make any money you need to sell. There are benefits to gold and silver as they can help hold wealth. Just holding gold and silver you don't make any return. Note: (This is why it is not a good investment but average and why I want income producing assets.)

I have done research on gold and silver I do know the thousands of years of history I have read Mike Maloney's book Guide to Investing in Gold and Silver. I have listened to countless hours of how the dollar will crash and people owning gold and silver will be rich. I think this is flawed analysis because gold and silver throughout time are over and undervalued but someone else has to want the asset at a higher price. To me it ends up being a pyramid where you hope you are not at the bottom when it breaks down and the ones above you sell. That is why in Warren Buffett's letter to his share holders he has a category where an asset doesn't produce anything. 

There is no investment that has the impact on ones purchasing power as does a dividend growth stock where it grows better than inflation. An interesting blog from Dividend Growth Investor Blog: http://seekingalpha.com/article/506941-dividend-investing-misconceptions?source=yahoo
Here he shows how you can own an asset and the misconception of it only returning 2% is to new investors if you been an investor form the beginning you are rewarded. 
 Apple has done the same a divided paid is not to attract new investors now but to reward past investors and reward the ones who buy now and stay in the years to come with divided growth. 

All investments can go down and not survive but to have an income producing asset if it produces that passive income that is what in the end matters. 

One last thought is the conspiracy that the dollar will collapse. Currencies have collapsed in the past and a new one has been born. The dollar is a rare currency throughout history a collapse would have consequences not seen before. Before this was to happen I think a solution would be conceived. There is always crisis in the world and the ones who don't lose their vision will succeed. I think an investment strategy on this fact alone. Strategies of fear will not profit and will not be my choice as an overall investment strategy. 

Sheldon

Disclaimer: This is a personal weblog. The opinions expressed here are my own. All data and information provided on this site is for informational purposes only. Please do your own research before investing. 


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