We private investors have some big advantages over the guys in the City. Last week, I mentioned one of them we can mix business with pleasure. Not all our investments need be financial. For example, I like to buy beautiful antique silver at a discount to the spot silver price traders pay in London. This way I don't pay any management fees, and I also get the pleasure of having my investment close at hand.
But there are many more benefits to a DIY approach to investment. Today I want to show you the most important one.
Find value, then buy and hold forever
Many Right Siders were happy to find a discounted way into silver. But then came the barrage... "What happens when I want to sell it?"
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Sell it? Who said anything about selling it?
Well, of course you may want to sell your silver some time. But that's not the way to think about this investment. The most profitable way to think about investment is forever' - you don't have to hold it forever, just try to think about it that way.
Most fund managers don't take the long view. They're constantly chopping and changing portfolios because of short-term influences. But the best value investors, the Buffetts, Neil Woodfords and the like, don't worry about all the short-term noise. Find value, then buy and hold, is the mantra. Don't worry about selling, the market will let you know when and how to do that.
Ten years ago, I focused my pension SIPP on commodities. I figured that I didn't really know where the stock market was going, and anyway I had plenty of stocks on my trading account. But I knew there was good reason to back commodities long-term. And that theme did very nicely indeed.
And though I thought the residential property market was over-valued (wrongly as it turned out!) I still bought buy-to-let property on the assumption that in 25 years' time, any loans would be paid off and the property would be a nice little pension.
As it happens, I have chopped and changed these investments. But I never planned to. I never thought about the investment as anything other than a buy and hold - forever!
That's how I view my physical silver investments something to tuck away. After all, none of us knows what tomorrow brings all we can do is make smart moves based on our long-term ambitions.
This week, Money Morning's resident gold guru, Dominic Frisby, told us about his gut-wrenching decision to buy a home. And if he does, he's going to have to part with some of his beloved gold. And that's fine. He bought the gold as a long-term investment, and it has done very nicely for him. And now that he needs to cash some in, then that's what he's going to have to do.
When the price of your investment has multiplied many times over, the last thing you're worried about is how you're going to sell it.
None of us knows what the financial climate will be ten years hence, and we can't be sure what savings we'll need to draw down anyway.
Maybe some wealthy Chinese family will be after my silverware (as they have been for fine wines this year). They might buy it from me online. Maybe it'll head to the smelter and be re-used for electronics and solar panels. Or maybe, just maybe, it'll still be in the cupboard in the lounge. I don't know.
But I'm confident there'll be strong demand for my silver in the future. I know that whatever happens in the financial universe (and I think something quite drastic will happen), there's a good chance that my silver will multiply in value.
I also know that the only management charge for this investment is a slightly higher home insurance premium and a little bit of silver polish.
and the impatient way to play it
I always talk about a diversified approach to investment. I hold silver ETFs, and I do have some spread bets on silver. I can always bail out of these investments, and my investment horizon can be slightly shorter with these positions.
So if you're convinced you'll want to cash in your silver investment soon (or you need cash), then maybe buying a tangible investment isn't best for you.
The most important thing is to try to think about your investments as a forever' purchase. What will your stock, bond, or silver ashtray look like in ten or 20 years' time?
And I'll tell you another thing: thinking about it in these terms will really make you think very hard about annual management fees and any other seepage' the industry whips out of your investments.
Just concentrate on the best long-term investments, getting a great in-price' and minimal annual charges. Then let the market come to you.
This article is taken from the free investment email The Right side. Sign up to The Right Side here.
Important Information
Your capital is at risk when you invest in shares - you can lose some or all of your money, so never risk more than you can afford to lose. Always seek personal advice if you are unsure about the suitability of any investment. Past performance and forecasts are not reliable indicators of future results. Commissions, fees and other charges can reduce returns from investments. Profits from share dealing are a form of income and subject to taxation. Tax treatment depends on individual circumstances and may be subject to change in the future. Please note that there will be no follow up to recommendations in The Right Side.
Managing Editor: Frank Hemsley. The Right Side is a regulated product issued by Fleet Street Publications Ltd.
Fleet Street Publications Ltd is authorised and regulated by the Financial Services Authority. FSA No 115234. https://www.fsa.gov.uk/register/home.do
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