Would you invest in a coin mutual fund?
dan1ecu
Posts: 1,573
Greetings, All -
What if there was a coin mutual fund started, where people could by shares of the fund and the fund would purchase and hold a diverse mixture of rare coins?
Would you invest in such a fund? This kind of thing would be for investing purposes only, because the coins would actually be owned by the fund.
I don't know if such a thing exists, but it might be good for those who need a small percentage of commodities in their investment portfolios.
What do you think?
Dan
What if there was a coin mutual fund started, where people could by shares of the fund and the fund would purchase and hold a diverse mixture of rare coins?
Would you invest in such a fund? This kind of thing would be for investing purposes only, because the coins would actually be owned by the fund.
I don't know if such a thing exists, but it might be good for those who need a small percentage of commodities in their investment portfolios.
What do you think?
Dan
0
Comments
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To even begin to list the reasons would be overwhelming. I will simply say "no."
Clankeye
Coins are not an investment and do not belong in a mutual fund.
If you want commodities buy a commodities fund.
If you want a coin investment buy CLCT the owner of this site and PCGS. The stock is up 50% over the last 24 months but down 50% the last 5 yrs.
1. The fees associated with running a mutual fund would eat into the profits. You’ve got to pay people to select the coins, store them, keep shareholder records, have an office, advertising, etc. and these would have to be paid through mutual fund fees.
2. The bid/ask spread in coins is much larger than in the stock market, so the coin price has to increase more just to break even.
3. The coin market is illiquid compared to the stock market. To move a large dollar amount of coins on a regular basis would probably require auctions that take time to advertise, conduct and collect the money.
4. The people who are skilled at selecting undervalued coins are already doing it for their own account and don’t need this type of arrangement. To attract the type of talent needed, you would have to pay them significantly higher than they are currently earning, moving your breakeven point out even further.
5. The skill involved in selecting undervalued coins is probably not “scalable”. For example, let’s say a person with the necessary skill has $1million of his own money to work with and he can pick coins that increase 25% per year, earning $250k. If you give this same person $100 million to work with, it’s not likely that he’ll be able to find that large of a quantity of coins undervalued by 25%.
6. The coin industry is much less regulated than the securities industry and there is a potential for scams. An unscrupulous mutual fund dealer, along with a few confederates could manipulate the early returns via bogus sales, then when publicity attracts more investors, they would take the funds and skip town.
Mike
Many clients of mine would also agree that privacy and portability is one of the most important aspects of making an investment in coins.
Ain't no body's bidness of my own.
TP
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
Same with stocks. I don't buy mutual funds, I buy individual stocks.
Ray
--Severian the Lame
From an investment standpoint, they're illiquid assets in a somewhat unpredictable market.
Aside from that, what pleasure would a collector get from investing in a fund? Maybe if the fund managers passed the coins around to all shareholders to keep in their personal collections for a period of time...
Well, you see the problems with that.
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That's the problem!!!
Go BIG or GO HOME. ©Bill
Looking for PCGS AU58 Washington's, 32-63.
Joe
That's the problem!
Actually, that's the opportunity! Assuming that the "mutual fund" is trading like a dealer, it can make money even when the market goes sideways. I'd invest if I respected the traders and the deal was structured fairly.
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
"Merrill Lynch & Co. announced that 399 coins costing $3.3 million were missing from the NFA World Coin Fund limited partnership. In August Merill said it would reimburse investors in the NFA fund for their initial purchase price and likewise would pay investors in its two other rare-coin partnerships, both of which had fallen in value. The moves cost Merrill up to $30 million." [Roger Boye, Britannica Book of the Year 1995 (Events of 1994), page 117.]
Do you really think anyone could do any better today? Au contraire! In this era of Worldcom and Enron, I doubt anybody would get their money back!
(Just think of city streets clogged with a hundred thousand horses each generating 15 lbs of manure every day...)
I can't even imagine trying to explain something like this to my wife.
There may be as many as two dozen people in the country to whom I would entrust my own money for such a purpose. (BTW, none of them ever worked for Enron, Worldcom or NFA.) Granted, most investors lack my capability to judge the fund managers, so they might be well advised to avoid ALL such funds. But that doesn't mean that a market insider such as myself should religiously avoid this class of investment.
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
CCU - Is that because you think your wife would think that investing in a coin fund would somehow be like collecting coins? If so, perhaps you should let ME explain it to her.
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
Fountainhead - You would avoid all coin funds because one went bad? Using that logic, you would avoid all stocks because of Enron. While that is your prerogative, it does not make for sound advice.
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
jcping - There are already a number of such funds, although to the best of my knowledge none have been marketed to the public. Good thing you didn't know it or you might have cashed out years ago, way too soon!
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
I am intrigued that you, a savvy dealer, would entertain participating in a coin mutual fund.
More than one. I think Kidder-Peabody's met a similar fate. The SEC started issuing warnings in 1991. PCGS was forced to add some sort of disclaimer - about the risk the coin market can fall. Salomon Brothers, reading the writing on the wall, had already dropped rare coins from its investment index by 1992.
If experienced dealers and collectors can only count a dozen people they would entrust with such an investment, my response is that clearly that is not a large enough number of trustworthy people. It takes more to administer such a fund.
And don't even think you can just walk in the vault to check on the holdings -- the insurance company will forbid it. Even so, storage costs on top of the usual overhead will easily drive up costs far above normal. Small investors will see their local safe-deposit box as more attractive; heavyweights will court Brinks for transport and Mat Securities (Switzerland) for storage.
(Just think of city streets clogged with a hundred thousand horses each generating 15 lbs of manure every day...)
No thanks. As it is I run a coin mutual fund at my house.
The dealers running the fund would love it! They would buy coins at wholesale and "sell" fund shares priced using retail values. Cool, clean 20%+ to the dealers, while the suckers... errr.... investors never know the difference. It's already been done with Small Cap stock funds.
FatMan - Good point. Because there's no precise way to value the fund, I wouldn't be comfortable setting a precise value for the units. On the other hand, if allowed by law, I'd be happy to make a spread and trade the units on behalf of the fund. (Forgive me for not being able to provide a very sophisticated answer. I'm hardly an expert on mutual funds and the laws that govern them.)
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
Fishcooker - Like you, I would not invest in a fund operated in such a manner. However, I can easily envision a fund in which I WOULD invest.
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
TDN - There's something to be said for letting other people make money for you while you hang at the beach or - perish the thought - work at a real job!
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
Oh, I agree completely. But the biggest factors in making money in coins are opportunity and time. Opportunity to buy the right coin and time to hold it until the ultimate buyer [or market]. In between those two events, there's plenty of time for the beach!
Count me out on the Legend Fund. When and if I invest in coin "mutual fund", I assure you that the managers will be full time traders.
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
Perfect question! Yes, there is (or at least should be) a huge difference. Investors in a fund would not pay a markup on each acquisition. They would likely pay an annual management fee and give up a percentage of the profits. Additionally, the fund manager would actively manage and trade the coins in the fund, likely to the substantial advantage of the investor.
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
etc.
A coin fund could certainly work though I wouldn't put Renato Ruiz as the principle.
roadrunner
Mark
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870