Monthly investment programs

Longacre

At some point in the past, there was a thread on the monthly investment programs that some firms offer. The general view was that board members looked with scorn upon these programs. Then I realized that although I don't view coins as "investments" per se, I consider stocks to be my investments. I own and contribute regularly to a bunch of mutual funds in which I have no active management role. What is the difference between a stock investment which I am sure other board members passively invest in, versus a monthly acquisition program that some people passively invest in, because they view coins as just another part of their investment portfolio? So are these monthly acquisition programs so bad for the "right" people? Comments?

Sequitur

What is the difference between a stock investment which I am sure other board members passively invest in, versus a monthly acquisition program that some people passively invest in, because they view coins as just another part of their investment portfolio?

Avoid the "coin" investment programs you see in magazines at all costs. The differences are significant.

First, investment advisers and broker-dealers in securities have to be licensced -- these professionals owe you a fiduciary duty and there are appropriateness tests governing security investments. Plus these professionals usually are backstopped by large organizations with hefty insurance policies.

Coin dealers? Call yourself a dealer and you are one. Zero protection for the collector/investor, other than some toothless coin organizations.

Second, shares of stock are fungible and are traded on nationally regulated exchanges -- there is a set market price for each share that you can instantly ascertain by looking at the publicly traded price. When you buy or sell your stock shares, you get the publicly traded price -- no games. Not so with coins. Coins are not fungible, there is no regulated public market, there are no market makers, etc. You don't know what kind of coin your getting until it arrives -- what do you do when you get coins that are POS's? You're screwed. And dealers charge collectors different prices than they do other dealers, so you are behind the 8-ball even before you make your first coin purchase. Again, these also are enormous differences.

When you invest in a companyt, it's an asset that hopefully is earning profits, perhaps paying a dividend, and hopefully has a rising share price. Coins? They sit there, earning nothing. Your only hope is that someone in the future will desire to pay more than you paid for your coin.

So I'd advise you, in the strongest possible terms, to avoid the coin "investment" programs -- they're a fraud. And I advise you to take my advice.

nwcs

Sound advice there

RYK

As one who additionally scorned these programs, I have softened my position after some input from the dealers. I personally would NEVER participate in one, nor would I consider my coins an INVESTMENT, but I do see a potential role for these in certain limited situations:

1. If you do not have the discipline to save up for big coin purchases, having your dealer automatically bill or debit you for smaller amounts might help you land the big coin.
2. If you would like to build a set/collection without doing any of the legwork. It does not seem to like much fun to me, but "different strokes for different folks".

Again, I would never be a participant in such a program, and it probably is not appropriate for any of the gunners on this message board.

BillJones

The so-called coin investment programs stink for the following reason.

Since the dealer is more or less assured of a sale to you from your monthly payments, which coins do you think he is going to send you: (A) Choice coins for which he could get premiums from discriminating buyers or (B) Run-of-the-mill or lesser coins grade coins that he’s looking to turnover?

If you answered (A), you are naïve. Investment programs are for chumps. The BEST way is to set aside a fixed amount of money for coins every month. Some months you might not buy anything. Other months when the RIGHT coin comes along, you can pounce on it. That’s what I’ve done for years.

Bear

If you want a monthly investment program, then you buy a coin a month

that YOU select from what ever YOU decide is the best source and you pay

what YOU decide is the best price. I believe that the advice of a reputable dealer is

important and helpful, but YOU must be you must be in control of your collection.

In many cases, but not all, the coins selected in such a program are cast off items

purchased cheaply by the company and slipped to you as investments. Since you are

not expected to sell anything for a number of years, you will not notice that you are

being had for some time.

topstuf

<< <i>Avoid the "coin" investment programs you see in magazines at all costs. >>



Even the "limited edition" ones?

cladking

Not only will the investment programs supply run-of-the-mill coins and grades but they
will usually be in series which are hard to sell or in hard to sell grades. These work well
for the dealers because they are a great place to dump coins and some dealers will pass
this on to the investor. Don't bet on it. While prices can be pretty low you should try to
sell some of these coins right off. Generally the costs of these coins are too high no matter
how cheap they are.

While coins are a great collectible and a dubious investment, if you must invest you are bet-
ter off doing it yourself. Find a dealer you can trust and buy coins you like or he recommends.
Sell some coins so you know what you're really paying for. Collectors usually do better than
investors so if you end up collecting you'll have more fun and probably more profit.

kranky

The difference between a stock fund and a coin monthly investment program is that every share of stock that a mutual fund purchases in XYZ company is valued the same and you can verify independently what that share is worth. People can verify what the past performance of the stock fund is and decide whether that's the right fund by comparing it to others, even though past performance is no guarantee of future results.

On the other hand, every coin is different and pricing is all over the place. Even if you specify the series, and grade you want, it's asking for trouble. Like Bill Jones said, you aren't going to get the best material.

It just doesn't make sense to say to a coin dealer "I'll take $300 worth of Morgans, please." No one would do that at a show, why do it through the mail?

RVDavis

I thought I might throw in my two cents' worth here.

I agree with everyone, turning over $50 or $500 to a dealer every month and saying "pick them and send them to me" is placing a great amount of trust in the dealer. If it is someone from whom you have been buying coins for decades, yeah OK that might be a reasonable. Answering a solicitation or an advertisement and participating in such a program would be ill advised in my opinion. The only way I would do so was if I wanted to buy bullion gold at market; hard to get hurt that way but in that case just go to a local dealer and buy it yourself. The mark-up will probably be the same and you can always sell gold.

OK saying all that: I spent 1995-2001 on Wall Street and saw more shennanigans and simple crookedness than you could find in 3 lifetimes of dealing with coin dealers. Those folks are so far removed from the individaul share holders that they just consider the entirety of the shareholding public to be a bottomless well of money so they all can retire at 26 years old after having traded for 4 or 5 years. Sounds cynical but that is what I experienced. And yes, I was a registered broker but never did any retail work.

I have a monthly coin investing program. I have convinced my wife that it is sound financial planning for me to spend a certain amount of money every month on Morgan dollars. I have the funds to indulge in my hobby and watch the value of my coins go up every year. She bought the concept so I get to play. Works for me.


Rick

UncleJoe

Question: Would anyone have a problem giving $50 - $300 per month to Coinguy1 or BillJones to purchase coins for you? (you can decide if the coins/series are their selection or your selection)

Joe.

RVDavis

Uncle Joe:

That is one of the points I make: if it is a trusted entitiy, I think it would be OK.

Rick

coinguy89

I don't think they are bad at all, as long as you get your moneys worth and your not getting crap. That's the bottom line right there. But im going to say 90% of the time your going to get average coins that the dealer has just been waiting to get rid of.

OnlyBuffalos

There are quite a few specialty dealers and dealers who specialize in high-end goods who have "collection building" programs which can have benefits for some collectors. The good ones do not require that you make a purchase every month nor that you keep anything that is sent one's way.

They are potentially beneficial for the person who does not have the time or ability to build a collection on his/her own. Many times it is the only way that the collector would have a shot at obtaining elusive pieces. They work best for the well-healed collector.

It is essential that the collector and seller understand fully what the collector wants. The seller is in effect is acting as an agent for the collector for which he is payed a fee. Many high-end collections have been build this way.

The $100 a month "investment programs" and their ilk, as others have said, are anything but investment programs for the collector. You would likely be far better off using the money to stuff your pillow.

ziggy29

Possibly worthwhile IF you have a well-established relationship with someone you know and trust, AND who knows you and what you look for in the coins you buy. They'd also have to trust you in this situation, as if they have a highly liquid, high-demand $5000 coin, they wouldn't want to accept $500 per month for 10 months from just anyone.

If you're essentially a nobody to a large, nameless and faceless dealer or if you have a dealer who isn't well noted for their integrity, it's a way to get mediocre coins you couldn't otherwise afford at one time.

I'd be wary of someone who calls it an "investment" plan, though. "Installment" plan would be a better choice of words.