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Knowing How to Sell an Investment

The other day I was looking at some physical gold bullion.  I was curious about the spot price as related to what is going on in the economy.  While that rabbit hole is a bit outside the scope of this blog, it did inspire a question in my mind.  Just how important is it to know how you will sell an investment?

How to Buy Precious Metals and Not Be Defrauded

X-rayvsn also deserves some of the credit for this post.  A few months ago he posted about how he was nearly defrauded purchasing silver off of Facebook.  The message there was that buying such metals from a random person was fraught with risk of being ripped off.  After all, if you are not a geologist how exactly do you validate if the gold brick you just received is real?  

I similarly have a “gold” coin I was given by my god father when I was 7.  In recent years some investigation revealed it was a common scam coin of that period.  I have no idea what he paid for it, but it was not a real coin and I am still not sure if it is a gold or gold plated token.  An investigation for another day perhaps, but you can read about “California Gold” here.

This all lead me to where you legitamately buy gold without risk.  A large company like Apmex.  They sell precious metals for a premium.  Sometimes that amount can be 30-50 dollars an ounce.   All because they are a validated source of precious metal trade.  IE you pay this premium to reduce your risk of being ripped off.

How to Sell a Precious Metal Investment

While I did not investigate I am sure there is a significant discount if they were to buy the metal back.   After all, if there is enough of a risk of being ripped off that people are willing to pay 30-50 dollars extra per ounce on the purchase, then it stands to reason it is harder to find an educated buyer on the open market on the backend because the other purchases are just as worried.  So it stands to reason selling back to Apmex would be easier and they could thus pay less.

Anyway, I write this all not to pick on Apmex, but to instead highlight an often not considered problem that faces many investments.  Not all of them are easy to sell when you are done. 

There is of course the liquidity aspect of this conundrum that I previously wrote about.  But there is also a cost impact.

How to Sell a Real Estate Investment

Anyone that has bought and sold a house has also seen this.  There is the realtor cost, the cost of the lawyer, title insurance, etc.  Basically high transactional costs to purchase, maintenance, and sale.  We as humans tend to focus on the transactional costs upfront but we completely forget about those on the backend.  This can be made even worse if you bought a home in a place where ultimately no one wants to buy later on.  Say you bought land that later became landlocked.  Then it might not just be transactional costs, it might be a high hurdle to even find a buyer.

My Own Failure to Consider How To Sell An Investment

Some of my own investments have suffered due to a failure to consider how to sell them. When I was a kid I “invested” heavily in comics and sports cards. The quotes is because I enjoyed reading such collectibles as well, but I still had this picture in my mind that some day they would be worth something. Are they worth something today? Based on some google searches some of them are worth a moderate amount.

But I have neither the time nor the resources to sell them. This is especially true with the modern era concept of grading a card. Thus the idea of them as an investment didn’t really work. (Note before someone calls me out saying this is easy to do, the reality is they are worth something if I sorted through the thousands I have. But their worth is probably less then the value of my time to take such action. So they sit in my basement.)

The Primary US Stock Market is Easy to Sell

One of the great things about stock market investing is that these transactional costs are low or in some cases 0.  In my experience this is the exception in the investing world.  So consider this a friendly reminder, always check about how difficult it will be to sell your investments.  What are the barriers and costs to the sale.

How Would You Sell Gold At the End of Civilization?

Before we end, back to picking on our gold example.  I’ve been fond of saying I don’t invest in gold because I don’t see the point.   Over the moderate term gold does not track inflation but rather fluctuates wildly.  But even if I thought it would serve as a good black swan protection, the question is who would you sell it too in the case of a true black swan.  

In the hypothetical world where the economy collapsed and you wanted to use gold, or another analogy Bitcoin, to get by, who would you sell too.  How would you find them to sell?  How would they validate you weren’t selling them fools gold or find a computer with a network to take your bitcoin?  Anyway, something to contemplate as a bigger question for preppers, I guess.

For now, I hope this slightly rambling post reminded you to always check how much it will cost you and how you will sell an investment before you purchase it.   

9 Comments

  1. Xrayvsn
    Xrayvsn August 16, 2021

    Very true that the ability to liquidate something is important consideration when investing in something.

    Gold can be counterfeited as I found out (thanks for the mention by the way) so buyers and sellers pay a premium just to know it is authentic. Bitcoin is supposed to solve that because the transaction itself is supposed to be the verification because of the blockchain.

  2. LadyFIRE
    LadyFIRE August 16, 2021

    Interesting thoughts, but the points you make about bitcoin hold for stock market investments too, I guess. Who would you sell those to at the end of civilization?

    You are right though that ease & cost of transaction matters. In my case, I have also bought (and sold) physical gold, both times to/from my own bank. I might consider buying a gold price tracking fund next time instead, but somehow there is also something reassuring about owning a physical item.

    As to real estate: For sure, it is a less liquid type of investment compared to others. But it also has the highest real world use. Worst case, I can live in the apartment/house I own to get some use out of it. The same is not true for stocks/gold/bitcoin…

    Everything has pros and cons, I guess. Personally, I try to spread my risk.

    All the best!

    • FullTimeFinance
      FullTimeFinance August 16, 2021

      Too true about your comment re stock market at the end of civilization. This part honestly was stated some parts tongue in cheek as I read about some doomsday preppers switching from gold to Bitcoin to prepare for the worst. I’m not really a prepper.

      In any case you are right it is a trade off. One sometimes people overlook.

  3. freddy smidlap
    freddy smidlap August 16, 2021

    nice post. i could tell you if your precious metal is real and even what else might be in the composition, but most people don’t operate an x-ray photoelectron spectrometer like i do. anyhow, you raise a great point about liquidity for physical investments. that’s why i love equities as an investment. plus, it’s not like you can sell 1/3 of a house but you can sell 1/3 of a stock investment in a few keystrokes for free.

    i still have sports cards in good shape from the late 70’s when i was a kid. it’s absolutely true about the grading process that has taken all that industry. i don’t want to be a full time enthusiast. i just want to sell the cards at a fair price. i swear if i could find a consignment expert to tell me which ones were even worth grading i would let them keep half the money. for now they will just sit there like yours.

    • FullTimeFinance
      FullTimeFinance August 16, 2021

      Maybe that is a business idea for someone. Collectible consignment targeted to specific areas of interest.

  4. Mr. 39 Months
    Mr. 39 Months August 18, 2021

    I am always fascinated by people getting precious metals for an “end of the world” scenario. Like your article notes, you need someone willing to buy that investment. I’m more interested in food, shelter, etc. in my (rather minor) prepping.

    I think considering the sale of an item, any item, has to be part of your consideration when you are purchasing, including stocks & bonds.

    Excellent article!

  5. Q-FI
    Q-FI August 18, 2021

    I own one ounce of real gold. It’s a Krugerrand my Grandmother gave me. That’s it for my precious metals in real investments or online.

    There’s a quote that has always stuck with me, and I can’t remember it word for word, so I’ll probably butcher it, but it’s along the lines of, “Buying is the easy part, it’s knowing when to sell that is the challenge.”

    I’ve always found selling to be the toughest and most emotional part of investing, and I don’t ever see that changing.

  6. IF - Impersonal Finances
    IF - Impersonal Finances September 5, 2021

    Now if you can just tell me how to sell some of the junk crypto currency I speculated on that would be much appreciated haha.

    I used to have a ton of cards/collectibles but you’re right, it’s a mountainous task to begin the selling process. I didn’t really see them as an investment growing up anyway–I just liked having them!

    • FullTimeFinance
      FullTimeFinance September 11, 2021

      I believe I morphed that way on the cards when I decided to keep them in a box after high school graduation. Can’t say they have been out of the box in years.

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