5 Tips for New Investors
1. Don’t buy rare, collectible, or limited edition items
Rare, collectible, or limited edition coins are coins that typically generate high commissions for the dealers. This means that when you sell the coins later, the “spread” between the buy and sell price will be much larger than for regular bullion coins. Many rare coins have a 20-30% spread between buy and sell price (a coin you buy from a dealer for $1000 you have to sell back to the dealer for only $700). Limited edition or special issued coins are often sold by dealers at a premium because “they aren’t available anywhere else.” In reality, most precious metals investors buy and sell only the most popular forms of gold and silver coins or bars—eagles, maples, and well recognized bars mass-produced from reputable refineries. Be very careful about buying anything that has an additional premium because it’s rare. If you are an investor, you want to buy gold and silver that’s immediately recognized and trusted around the world, so “rare” will often hurt you, not help you.
2. Double check your dealer!
Unfortunately, it’s critically important to choose a good dealer to work with. One very large, well-known company went bankrupt in 2014 with potentially tens of millions in unshipped orders. But with a little bit of basic common sense, you can avoid these companies. That’s why it’s key to check the following sources before buying.
(And since you are reading this website, we linked to our reviews directly to make it convenient to research our history.)
- Check the Better Business Bureau. But don’t just stop here – many businesses that are overpriced and regularly charge too much still have “good” ratings
- Check Gold Dealer Reviews and other 3rd party review sites, like TrustLink.
- Call them. When you get on the phone, see if they are pushy or unclear about pricing. If a dealer can’t give you a solid price within 15-30 seconds of you asking, keep looking.
- Google them. Include words like “scam” or “rip-off” in the search and see what comes up.
3. Know the Numbers
Many investors feel stupid when it’s their first time. That’s a normal feeling—you don’t know all the lingo and you’re probably talking to someone that’s been dealing in precious metals for decades. But it’s important to understand how pricing works.
A coin or bar should be priced like this:
SPOT PRICE (the live price of silver on the world markets) + PREMIUM (the markup that includes the cost of manufacturing the coin) = PER OZ PRICE
SPOT + PREMIUM = TOTAL. Simple enough?
In addition to your per-coin price, many dealers will add on a 1-2% commission, shipping & insurance fees, handling fees, and in some cases, taxes.
Cornerstone never charges tax (because of Colorado law), and all of our commissions are included in the premium we charge. If you buy more than 500 oz of silver or 15 oz of gold, shipping and insurance are free too.
Always make sure you compare the TOTAL price per coin, out the door, including all fees. Many dealers will use deceptive front-end pricing, but slip in extra fees along the way.
4. Ask for the “sellback” price
Another good way to double check the pricing a dealer is offering you is to get the price that dealer will pay you if sold the coins right back. You should be able to sell a silver coin or bar back to the dealer for just a bit less than what you are buying it at (assuming the price of gold and silver stay the same) … that “spread” between the buy and the sell price determines how competitive the dealer is that you are working with.
One of our clients admitted to us that their previous dealer sold them a $1,000 gold coin but would only pay $700 to buy it back the same day. Don’t get ripped off – ask first.
5. Be careful on “Pre-funding” your account
Many dealers ask you to “pre-fund” your account before you can place an order. That means that you’ll need to wire them funds or send them a check and allow them to clear that check, all before you can place an order. . . that means the markets could move up 5-10% or more before you’re even allowed to place an order.
Often, the extra fees will come up when you finalize the order, and since they already have your money, it’s a small act of Congress to get them to return the funds and allow you to order from someone else.
At Cornerstone, we lock in the price on the phone when you—the customer—decide you’re ready to buy.