Ten common mistakes people make when buying gold

Buying gold has long been touted as a terrific way to diversify your investment portfolio and protect yourself against downturns in global currency values and financial markets. At first glance, the process seems simple enough. You just find a couple of coins that look good, fork over your cash, and store your loot in a safe, right? Wrong. There's much more involved in gold investing than browsing through a coin catalog and picking out your favorites. Unfortunately a lot of people actually take that approach-and end up losing quite a bit of money while doing so. 

But you shouldn't let the fear of making mistakes prevent you from taking steps to solidify your financial standing. All you have to do is be aware of potential pitfalls so you can avoid them when the time comes to buy. Here are 10 of the most common mistakes to look out for prior to purchasing this precious metal. 

1. Lack of knowledge. There is no excuse for being uninformed. As long as you have access to the Internet, you should be able to find out all you need to know about the basic ins and outs of gold investing. You should start by reading a glossary of terms related to this activity before moving on to articles and other resources so you know exactly what the experts are talking about. 

2. Misunderstanding the value of gold. This mistake goes hand in hand with lack of knowledge. In order to invest wisely, you must understand how the metal-especially in coin form-derives its value based on things like history, scarcity, rarity, indestructibility, and global recognition as a desired commodity. 

3. Indecision about your investment amount. People who are new to buying gold frequently make the mistake of either ordering too much or too little of the metal. If you buy too much, it defeats the purpose of diversifying your portfolio. If you buy too little, you're not doing enough to protect your other assets. Most experts agree that your coin holdings should equal from 5 to 30 percent of the combined value of the stocks, bonds, and mutual funds in your portfolio. 

4. Expecting big short-term gains. Gold investing is not going to make you rich overnight, so if you're interested in short-term gains, you should check out other options. The point of putting your money into investment grade coins is to hold onto them for a long time while they appreciate in value. 

5. Linking gold markets to the stock market. Some would-be investors are under the mistaken impression that gold prices are somehow linked to the stock market, and that fluctuations in one will lead to corresponding reactions in the other. But it's important to understand that the two markets are largely independent of one another, so your purchasing decisions shouldn't be based on illusory cause-effect relationships. 

6. Substituting gold stock or ETFs for the physical metal. Buying gold to protect your assets against unstable market conditions, inflation, and other economic problems is a smart move-but only if you get the metal itself instead of stocks, exchange traded funds, or other unworthy substitutes. 

7. Skipping Rare Certified Gold in favor of bullion. Not all gold investments are created equal. Bullion, for example, will not appreciate in value based on age, rarity, or other variables. It will only be worth what the commodities market dictates. By contrast, Rare Certified Gold coins that are held for many years can end up being worth far more than what their weight would command on the commodities market, since their value is driven by supply and demand. 

8. Looking for cheap prices. Although getting a bargain is usually considered a good thing, that's not necessarily the case when it comes to buying gold. Abnormally cheap prices are typically an indication of inferior quality, and are therefore a clear sign to stay away-unless you don't mind getting stuck with something that you won't be able to resell when you need cash. 

9. Working with multiple dealers.Because of the large sums involved in gold investing, it would be worth the time and effort to seek out a reputable dealer and stick with that person for each transaction you make. You will get to know and trust each other a bit more after every deal, which will in turn pave the way for discounts on bulk purchases and similar goodwill gestures. 

10. Failure to understand premiums over spot. Buying gold coins always involves a dealer markup or premium. This is what you're expected to pay over the spot price, and varies from dealer to dealer. It's critical to have some knowledge of fair premiums over spot in order to be able to identify any good or bad deals that might come your way. 

In order to make sound decisions when buying gold, it is imperative that you first learn all you can about gold investing. There are lots of factors that impact each transaction, so the more you know, the better your chances of being successful. 
Courtesy : EzineArticles.com
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GOLDEN RULES FOR COMMODITY TRADING

• Plan your trades. Trade your plan.
• Keep records of your trading results.
• Keep a positive attitude, no matter how much you lose.
• Don't take the market home.Continually set higher trading goals.
• Successful traders buy into bad news and sell into good news.
• Successful traders are not afraid to buy high and sell low.
• Successful traders have a well-scheduled planned time for studying the markets.
• Successful traders isolate themselves from the opinions of others.
• Continually strive for patience, perseverance, determination, and rational action.
• Limit your losses - use stops!
• Never cancel a stop loss order after you have placed it!
• Place the stop at the time you make your trade.
• Never get into the market because you are anxious because of waiting.
• Avoid getting in or out of the market too often.Losses make the trader studious - not profits.
• Take advantage of every loss to improve your knowledge of market action.
• The most difficult task in speculation is not prediction but self-control. Successful trading is difficult and frustrating. You are the most important element in the equation for success.
• Always discipline yourself by following a pre-determined set of rules.
• Remember that a bear market will give back in one month what a bull market has taken three months to build.
• Don't ever allow a big winning trade to turn into a loser. Stop yourself out if the market moves against you 20% from your peak profit point.
• You must have a program, you must know your program, and you must follow your program.
• Expect and accept losses gracefully. Those who brood over losses always miss the next opportunity, which more than likely will be profitable.
• Split your profits right down the middle and never risk more than 50% of them again in the market.
• The key to successful trading is knowing yourself and your stress point.
• The difference between winners and losers isn't so much native ability as it is discipline exercised in avoiding mistakes.
• In trading as in fencing there are the quick and the dead.
• Speech may be silver but silence is golden. Traders with the golden touch do not talk about their success.
• Dream big dreams and think tall. Very few people set goals too high. A man becomes what he thinks about all day long.
• Accept failure as a step towards victory.
• Have you taken a loss? Forget it quickly. Have you taken a profit? Forget it even quicker! Don't let ego and greed inhibit clear thinking and hard work.
• One cannot do anything about yesterday. When one door closes, another door opens.
• The greater opportunity always lies through the open door.
• The deepest secret for the trader is to subordinate his will to the will of the market. The market is truth as it reflects all forces that bear upon it. As long as he recognizes this he is safe. When he ignores this, he is lost and doomed.
• It's much easier to put on a trade than to take it off.
• If a market doesn't do what you think it should do, get out.
• Beware of large positions that can control your emotions. Don't be overly aggressive with the market. Treat it gently by allowing your equity to grow steadily rather than in bursts.
• Never add to a losing position.
• Beware of trying to pick tops or bottoms.
• You must believe in yourself and your judgement if you expect to make a living at this game.
• In a narrow market there is no sense in trying to anticipate what the next big movement is going to be - up or down.
• A loss never bothers me after I take it. I forget it overnight. But being wrong and not taking the loss - that is what does the damage to the pocket book and to the soul.
• Never volunteer advice and never brag of your winnings.
• Of all speculative blunders, there are few greater than selling what shows a profit and keeping what shows a loss.
• Standing aside is a position.
• It is better to be more interested in the market's reaction to new information than in the piece of news itself.
• If you don't know who you are, the markets are an expensive place to find out.
• In the world of money, which is a world shaped by human behavior, nobody has the foggiest notion of what will happen in the future. Mark that word - Nobody! Thus the successful trader does not base moves on what supposedly will happen but reacts instead to what does happen.
• Except in unusual circumstances, get in the habit of taking your profit too soon. Don't torment yourself if a trade continues winning without you. Chances are it won't continue long. If it does, console yourself by thinking of all the times when liquidating early reserved gains that you would have otherwise lost.
• When the ship starts to sink, don't pray - jump!
• Lose your opinion - not your money.
• Assimilate into your very bones a set of trading rules that works for you

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