What is Silver and Gold Investing?
Many people have the wrong perception of silver and gold investing. They think of it as “a way become rich” by obtaining cash profits within a period of time.
However, the real truth is far more complex than that.
The idea of “becoming rich” is simply defined as having more money than you can spend. This clearly means that you need to either
- Spend less or
- Earn more.
One of the ways to earn more is to invest in things that obviously will give you the money in return. This could be in the form of stocks, bonds and real estate. These are essentially instruments that pay you back more money than you spent on it, because of their ability to generate some kind of profitable transactions that you may directly or indirectly be responsible for. In other words, they exist to make more money because of their ability to create or provide an essential product or service. They exist to generate more money.
Gold and silver itself cannot be seen as a way to make
So why do people “invest” in gold and silver?
In the financial world, gold and silver serve as a hedge instrument: a way of protecting oneself against financial loss or other financially adverse circumstances.
Let’s look at this in simpler terms: Imagine having a gift voucher that allows you to exchange it with anything in a department store at any time regardless of the how much the price might change over the years, with no expiry date. That voucher is a valuable instrument for you to protect yourself against scenarios where you would have to pay more for something because of inflation.
Well, gold and silver generally work along that parallel.
So… what is Inflation?
Jus as they are people who are confused about silver and gold investing, many people also truly do not understand what inflation is, defining it as the rising cost of living.
In reality, inflation describes a very complex scenario where the value of something used as money drops. An example of this scenario would be a diamond ring. Buying it new from the store requires a lot of money. Let’s take it that the price of the diamond ring cost about $2,000. But as soon as the diamond leaves the store the diamond ring will not be able to buy anything that cost $2,000.
Simply put, when something (like money) that used to be valuable loses its value
How does inflation even happen? How did money become less valuable?
In summary, there’s simply too much money chasing after too little products.
You may think that having a lot of money in the world is good. But it really depends on what kind of money we have and who owns that money.
We can go into the explanation of how having more money in the economy causes inflation to happen, but we have actually found a video that explains it in a simple and effective way:
So inflation makes us pay more and more…
What we can buy with a certain amount of money ten years ago is not the same as what we can buy today. An item that cost $50 ten years ago can cost $75 today.
But actually the correct way to think of it is: $50 buys us less today than it could ten years ago.
Remember: The value of the things we need did not rise. It is the value of our money that is falling!
… while we are actually being paid less and less…
Even though the average wage of Singaporeans have increased over the last 10 years, our ability to purchase goods have not been quite the same as before.
Take a look the two infographics (right) from our Instagram account (we would be pleased if you could even follow it!). It will help you understand it better:
If Singaporeans are paid in gold, we would be earning less than we did 10 years ago. #fact #singstat #gold #wealth #investment #wage #singapore #singaporean #inflation #simplified #silvercoinssg
A photo posted by Silver Coins Singapore Pte Ltd (@silvercoinssg) on
In Chapter 2…
We will explore the benefits a silver and gold portfolio can offer.