Rare Coins are NOT a Good Investment, Agree or Disagree?
dragon
Posts: 4,548 ✭✭
I've never considered any coin I've ever bought or owned as an investment or something I had purchased with the express intention of making capital gains, or keeping up with inflation or anything else.
Here are my reasons why:
1) Buy / sell spreads can be enormous (10-40%) depending on who you buy from and what you buy. Don't believe that??........just buy any 5 or 6 figure "investment" type coin or "portfolio" from any dealer and then ask them 4 weeks later what their buyback price is. And this is also considering you are dealing with a respected and honest dealer to begin with.
2) There are no reliable pricing sheets to go by. Except for the most common and inexpensive widgets, many "investment" quality coins can sell for either way over or significantly under any current published bid prices depending on its quality / desirability for any given grade, the current climate, popularity for that series, etc. Thus whatever is hot today may be very undesirable when it comes time to liquidate.
3) The rare coin market is completely unregulated and self policing. That statement speaks for itself
4) Ever changing and evolving grading standards. I have to laugh everytime I read one of those investment comparison charts showing how rare coins have performed over the last 20-75 yrs. since grading has changed so much over time that coins purchased at any certain grade 20 or 50 yrs. ago could grade far higher or lower by todays standards thus altering their current value by multiples and making any long term performance charts useless.
5) Large premiums paid today for PQ coins may not be recoverable down the road. While many dealers will sell coins that are PQ for the grade for a significant premium, there is no way of knowing if the market will also consider that same coin as PQ or if that premium will be recoverable when you sell years from now.
6) No dividends, storage costs, insurance costs, auction fees, etc. All this must be considered when final investment returns are calculated.
7) Rare coins are an "insiders" game, and newbies and the unknowledgeable generally get fleeced. Again, this statement has been self evident for a long time and speaks for itself.
8) Years of experience and knowledge required (see #7).
This is just my devils advocate view from 25+ years of experience, opposing views are welcome.
Here are my reasons why:
1) Buy / sell spreads can be enormous (10-40%) depending on who you buy from and what you buy. Don't believe that??........just buy any 5 or 6 figure "investment" type coin or "portfolio" from any dealer and then ask them 4 weeks later what their buyback price is. And this is also considering you are dealing with a respected and honest dealer to begin with.
2) There are no reliable pricing sheets to go by. Except for the most common and inexpensive widgets, many "investment" quality coins can sell for either way over or significantly under any current published bid prices depending on its quality / desirability for any given grade, the current climate, popularity for that series, etc. Thus whatever is hot today may be very undesirable when it comes time to liquidate.
3) The rare coin market is completely unregulated and self policing. That statement speaks for itself
4) Ever changing and evolving grading standards. I have to laugh everytime I read one of those investment comparison charts showing how rare coins have performed over the last 20-75 yrs. since grading has changed so much over time that coins purchased at any certain grade 20 or 50 yrs. ago could grade far higher or lower by todays standards thus altering their current value by multiples and making any long term performance charts useless.
5) Large premiums paid today for PQ coins may not be recoverable down the road. While many dealers will sell coins that are PQ for the grade for a significant premium, there is no way of knowing if the market will also consider that same coin as PQ or if that premium will be recoverable when you sell years from now.
6) No dividends, storage costs, insurance costs, auction fees, etc. All this must be considered when final investment returns are calculated.
7) Rare coins are an "insiders" game, and newbies and the unknowledgeable generally get fleeced. Again, this statement has been self evident for a long time and speaks for itself.
8) Years of experience and knowledge required (see #7).
This is just my devils advocate view from 25+ years of experience, opposing views are welcome.
0
Comments
straight and in plain talk as always. If coins are
to be an investment, it better be long term, or you
can lose a significant amount of money. It takes experience
and a good grading eye, before you can ever consider flipping coins
for a profit.
Camelot
NSDR - Life Member
SSDC - Life Member
ANA - Pay As I Go Member
“I believe in intuitions and inspirations. I sometimes feel that I am right. I do not know that I am. When two expeditions of scientists, financed by the Royal Academy, went forth to test my theory of relativity, I was convinced that their conclusions would tally with my hypothesis. I was not surprised when the eclipse of May 29, 1919, confirmed my intuitions. I would have been surprised if I had been wrong.”
“Then you trust more to your imagination than to your knowledge?”
“I am enough of the artist to draw freely upon my imagination. Imagination is more important than knowledge. Knowledge is limited. Imagination encircles the world.”
Albert Einstein- quoted in Saturday Evening Post interview (1929)
I sure do have a lot of fun with the coins I have. I enjoy them . . . relax and study them . . . and use them as a vehicle to enhance friendships, etc. It is hard to sit around a table and admire stock portfolios or mutual funds. My coins ARE an investment for me . . long term and carefully considered. But regardless, the ownership enjoyment is hard to discount . . .
Like HRH has said . . . have fun with your coins. Some of us may actually make a little bit on them in the long run too.
Drunner
Can be a terrific investment not only financially but in other ways as well.
Can also be a real bummer too.
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
I completely believe the short term is not the way to go with coins. jws
I think that historically long term coins have been pretty good. I believe that an MS65 coin 30 years ago would grade MS67 today which makes the increase in coin values much more than it would seem comparing say MS65 prices of 30 years ago with MS65 prices today. I showed some MS65 Saints to an old timer who graded them AU !
But, the real question is what about the future ? I'm very concerned the hobby could go down hill after the baby boom generation passes on. My children, in their 40's and very successful couldn't care less about coin collecting and when I go to shows I see boomers.
<< <i>7) Rare coins are an "insiders" game, and newbies and the unknowledgeable generally get fleeced. Again, this statement has been self evident for a long time and speaks for itself. >>
How is this any different than other investments like the stock market?
Worry is the interest you pay on a debt you may not owe.
"Paper money eventually returns to its intrinsic value---zero."----Voltaire
"Everything you say should be true, but not everything true should be said."----Voltaire
That said, some collectors do well financially, a small handful, extremely well, though it is always the dealers that make the lion's share of the money. Those collectors that do well, tend to love the hobby, spend endless hours studying coins and making contacts, tend to have a superior eye for grading as well as taking the considerable time to hone that talent.
This is almost the opposite of the typical coin investor, who often wants to spend relatively little time on coins and just wants them to go up in value. They typically know next to nothing about their coins, and don't want to learn. In numismatics, this is recipe for losing lots of money, often lots of money, unless a person has extraordinarily good fortune.
JT
You can't really predict the market and even if you're right it can be difficult to make a profit.
Collectibles are an extremely risky arena for speculation. Along with this risk there is also a
great chance for reward but such rewards tend to go to those with the knowledge, stamina,
and/or wealth to capitalize on opportunities. Coins are better for enjoyment than profit and
if you're enjoying them you're more likely to profit and you're already far ahead of the game.
Edit: Timeline is over 20yrs. I'm in it for the long haul.
Just a couple of thoughts on a Friday!
K
Besides - show me a coin collector and tell me that he is not also an investor. The distinction is very blurry, most of the time. I may like Platinum Eagles and nice Large Cents, but I also collect Cents, Nickels, Dimes and Quarters from pocket change, and I still put them into Whitman folders. Am I an investor or a collector?
I knew it would happen.
One usually profits when parting with a rare coin, so I'd agree that rare coins are...
A good investment.
<< <i>Besides - show me a coin collector and tell me that he is not also an investor. >>
Hi. I've been collecting error coins since 1987ish. Some of them have gone up 10 times or more in value. I have no thoughts of selling, or even of just holding those I have and not adding any more at the present (high) prices.
Ed. S.
(EJS)
With the right dealer working for you and advising you, anyone can do well in the market. A 5-10% commission
at auctions will get you the right coins if you have a sharp dealer working for you. You can find one that is
well recommended. Having a good eye, years of experience, and knowing market cycles are huge pluses.
Your dealer should be able to bring that to the table as well. In the last 3 up cycles in rare coins, the right
coins were plentiful enough and they appreciated 3 to 5X during a 3-7 year period. You do not have to hold
on for 20-30 years either. In a strong up cycle, you can double up in 1-2 years. A number of examples were
put out over the past few nights. It's not easy to select the right coins on your own unless you've been in the
trenches for a number of years. Work with the wrong dealer and you're scammed.
Rare coins can be just as good as an investment as anything else. Knowledge counts. Access counts.
roadrunner
You can have the grading savy, knowledge of market cycles, and all of that. But there is still an element of luck. Case in point: Six years ago, I felt that proof Walkers were ridiculously low at $600-700. I bought a few and that led to putting together an entire set of 1936-42 proofs-- cents thru halves in PF66-68. I put like amounts into hand picked high grade 20th century key dates and classic commems. Well the first two groups tripled in price while the commems languished. For a while I thought that I was smart. Then I realized that while there might have been a touch of smarts to recognize Walkers were at a low, it was more likely good fortune brought on by a widely advancing market.
What I learned: 1) Diversify
2) Don't invest in coins
If coins are not a good investment then how in the heck do dealers stay in business ?
I can see where a newb jumping into the game and buying without any knowledge could and would get burned but a person that studies the market and does not jump at every price or grade that looks like a deal can do all right both short term and long term.
There, I have finally said something after 5 yeras here about this subject.
Ken
<< <i>I have to laugh everytime I read one of those investment comparison charts showing how rare coins have performed over the last 20-75 yrs. since grading has changed so much over time that coins purchased at any certain grade 20 or 50 yrs. ago could grade far higher or lower by todays standards thus altering their current value by multiples and making any long term performance charts useless. >>
I see I'm not the only one who chuckles at investment charts for rare coins.
Great post by the way.
NSDR - Life Member
SSDC - Life Member
ANA - Pay As I Go Member
<< <i>Disagree. I think as the baby boomers retire, you will see a huge increase in the coin trade. Auction TV is just beginning to take root. I've been hearing more ads lately about coins/gold as part of your IRA. Personally, I'll flip a few coins simply to buy more. Ultimately - My goal is to hand everything over to my children, educate them along the way and let them make their own decisions.
Edit: Timeline is over 20yrs. I'm in it for the long haul. >>
I am a recently retired, well nearly retired baby boomer and I have absolutely no intention of counting on coins to create an investment return. If anything retirees should be in cautious investments. I am a net seller not buyer. Coins are a fun an escape from the daily grind of work and for me thats 49 years of it. Time to enjoy life with proven investments not speculate.
I would argue that coins (and other collectibles for that matter) closely follow macro-economic factors like GDP. And for those "investment professionals" that show you charts of recent rare coin performance, ask them to chart rare coin performance vs. HPA, SPX, gold, and oil total returns over the past few years.
One major problem with this type of investment is: it’s always easier to get into the trade than out of it. The problem I see for coin investors in 20 years or so, is who is going to buy all these coins? I am 29 and I don't see many people my age collecting. Not to mention the fact that as a generation, the boomers are bigger anyway.
I would rather invest in something that I can reasonably value and do my gambling in Vegas. For me, coins are simply a hobby and a great way to learn about history.
<< <i>
I am a recently retired, well nearly retired baby boomer and I have absolutely no intention of counting on coins to create an investment return. If anything retirees should be in cautious investments. I am a net seller not buyer. Coins are a fun an escape from the daily grind of work and for me thats 49 years of it. Time to enjoy life with proven investments not speculate. >>
Retirees have been net sellers of collectibles in the past. Many people
quit collecting altogether when they retire. This may change a little for
the boomers since longevity is so much higher and many will retire late
or early. This will be the wealthiest demographic with very high income
as well.
can lose a significant amount of money." (bear)
/////////////////////////////////////////////
Yup.
And, you need to be prepared to sell them while the profit
light is still lit.
Otherwise, they are just something fun to have.
////////////////////////////////////
"If coins are not a good investment then how in the heck do dealers stay in business ?"
Buy REALLY low. Sell as HIGH as possible.
<< <i>If coins are not a good investment then how in the heck do dealers stay in business ? >>
It is a great business for good dealers.
I agree with the original post. The markups are brutal for collectors - when it comes time to both buy and sell. For those that point to E-Bay, etc., that may help; but if you are not a frequent E-Bayer it can be very tough to sell there.
For investments - index mutual funds are the easiest, safest, and best way to go.
It beats the hell out of most hobbies in terms of what you put into it relative to what you get out of it.
"You know how to make a small fortune in coins?
Start with a large fortune."
I collect for enjoyment, but I spent some time around some collectors who have done phenomenally well, financially, with coins. They are all dedicated collectors who have studied with the best (until they became the best), had a long term approach, and bought the best quality coins that they could. I am not sure if this is the recipe for success, but these, along with some luck and rising market, have helped them do very well.
Classic commems that are not extra-special have shown little or no gain in the last 10 years.
MS and proof lib nickels, (except the true rarities), proof barbers, and quarters, have remained about the same for 10 years. At least in grades below MS and Pr 67.
BUT, early dollars in AU 58 and better have risen nicely in the last 6 years, perhaps peaking last year, and early halves, esp. the 1794, 96, 97, 01, 02 are all showing multiple gains in AU 50 and better.
1884 and 85 Trade dollars, proof gold, early gold, $50 Pan Pacs and even the 20th century series with rarities have done extremely well.
How do you decide what to put aside, that will increase in value, almost every several years? That is the 64,000 dollar question.
What I learned: 1) Diversify
2) Don't invest in coins
Or: Diversify / Don't "INVEST" in stocks. It's as much a speculation and greater fool theory as the next gamble.
The so-called investment charts for coins is real if you bought quality.
Many solid gem better date type coin (silver or gold) from the mid - 1970's (or top circ specimens of rare types or dates) are worth 20 to 30X that today. Probably a similar result with the best stocks as well. The thing is that the coin cycles move counter to the stock cycles as a rule. It's nuts to be in either cycle long term when it's in a long-term bear cycle (unless you play short in down cycles). I see stocks, coins and other investments as things to have for periods of 3-7 years, then get out for the longer term down cycle. 30 year holds (or even 10-20 year holds) makes no sense today imo. We will likely never see another credit expansion in equities like we did from 1982-2000. That's a fantasy world that once existed. Commodities will play the strong role from now until 2012-2015.
who will buy all the investment coins in 20 years?
I ask that same question as to who will buy all the darn stocks in 20 yrs? Baby boomers? Get real. Generation Xers? Nope.
Massive mark ups of 20-40% are killers to investors
Certainly true. But if one hasn't figured out the sources to buy at 0-10% within wholesale in coins, they should look for other dealers.
The coins and the means to get them are out there if you put is some effort. The current "theories" of where to put your money for retirement in 10-25 years will be sorely tested in the near future.
Most of the coins I picked and put away for "I" purposes tended to do very well. It's the ones that you try and flip "quick" that often smoke you out. Buying quality costs but hurts far less at sale time.
And getting to look at pretty coins is a nice payback as well.
roadrunner
Another problem is Taxes. Coins held for the "Long Term" are taxed much heavier than other investments - and that's just considering today's laws. Think income taxes are going down 20 years from now?
Numismatics is a hobby for a hobbyist
it is a game if you are a player.
It's a religion if you are a classic collector.
It's a passion if you're a purist.
It's a market if you are an investor ! It's an industry if you are a shareholder.
rare coins are the cream of the crop in numismatics and RARE COINS are a good investment.
NOTE: No trees were killed in the sending of this message. However, a large number of electrons were terribly inconvenienced.
Type collector since 1981
Current focus 1855 date type set
I can go along with this to an extent. The good investor needs to thoroughly understand rarity, grading and the ever-changing market, however. Understanding these three things and being able to buy and sell at the right time will go a long ways in making RARE COINS a good investment for the good investor. The investor who wants to be among the best should stand ready to understand the people who actually collect RARE COINS.
"I buy stocks and bonds for investment, coins for enjoyment."
Question: Do the coins you buy need to be RARE for you to enjoy?
Disclaimer: mr1874's definition of what is rare in numismatics is very strict. mr1874 has yet to own a truly RARE coin. He has owned coins that are considered extremely scarce by some collectors. mr1874 collects coins for enjoyment and invests in fishing.
“I believe in intuitions and inspirations. I sometimes feel that I am right. I do not know that I am. When two expeditions of scientists, financed by the Royal Academy, went forth to test my theory of relativity, I was convinced that their conclusions would tally with my hypothesis. I was not surprised when the eclipse of May 29, 1919, confirmed my intuitions. I would have been surprised if I had been wrong.”
“Then you trust more to your imagination than to your knowledge?”
“I am enough of the artist to draw freely upon my imagination. Imagination is more important than knowledge. Knowledge is limited. Imagination encircles the world.”
Albert Einstein- quoted in Saturday Evening Post interview (1929)
I don't think of coins as an investment, but it is cool to have a hobby where I'm a lot less hesitant to drop thousands of dollars on it because that value isn't likely lost for all time.
That was the time before laymen were using Internet and sales/purchases were made via letters, teletype and faxes.
I am adding my experience to this thread after having re-read come of our faxed exchanges of that time (1987 through 1991).
Hal basically asked me what I wanted to buy when I started and I told him that I wanted "solid value coins" in the best condition I could afford that would not be simply a fad.
He suggested I choose from:
a) gold 2.5 dollar coins
b) high level Morgan dollars (avoiding monster coins that are hard to sell when you need money).
c) Carson City coins of any kind
d) small cents up to 1959
e) a complete set of Canadian dollars
f) type coins of true rarities (1942/1 dimes, 1955/55 cents, 1916 SLQ, 1877 IHC, 1937 3 leg, 1881 3 dollar coins, etc)
He also told me that although "slabbed" coins were less frequent (this was in the late 1980's) I should prefer them as a means of guaranteeing value during my lifetime (see dragon's point number 4 at the beginning of this thread).
As far as silver commemoratives were concerned "buy them if you like them but don't expect them to go up much"
I still own many of the coins I bought from him (the raw coins that I bought from him all came back at least PCGS MS63 or MS64 - 1879-CC, 1894 Morgans to name a few).
The prices were reasonable then in comparison with what others were asking.
I agreed with him that he would send me coins on a monthly basis according to a budget which we agreed upon and every month I would see an envelope arrive with a ton of stamps on it containing his choices for my collection. We managed my want list accordingly.
He preferred that I pay him once I had seen the coins and liked them and not beforehand. This surprised me but he said that he felt I would "like the coins more that way"
This is a little bit of personal history which may be of no interest.
I am writing about it because my experience with reputable dealers (I have dealt with many more since then) that do not overcharge or overhype has only been positive.
My sole regret is to not have followed the advice I received in some cases.
In particular on EBay I frequently start "hearing" that nagging little voice warning me to "watch out" when I see things that look too good to be true.
I learned from Hal and from others to not look for pots at the end of a rainbow.
In my professional world (computer software) you sometimes get what you pay for but generally only if you know what you are doing.
That should be true in coin collecting too. But I have never seen a coin sky rocket in value in the short term. And even in the long term the returns (with some exceptions) is nothing to write home about.
I collect because I enjoy coins. I leave the "thrills" of mercurial gains/losses to friends and acquaintances that are addicted to the stock market.
Collecting since the 1980's
Morgan Dollars Circ. Strikes
- Basic Set - Varieties - Prooflike Basic Set - Date Set
- Carson City - Early S Mint Short Set - Mintmark Type Set
Morgan Dollars Proof
- Basic Set - Varieties
Peace Circ.
roadrunner
If you didn't understand this the first time, keep trying it until you getit...It's really true.
Good post!
Coin ON!
On another occasion, a top dealer sold me a pop 1 coin at 5% over CDN. I knew the CDN bid was too low and I bought the coin for "retail" and flipped it to another retailer for "wholesale" money. This, even though I didn't really like the coin. The retailer then marked the coin up 2X CDN bid to make 80% on it. It sold for far less, but I bailed on the coin because it was a coin that should have never ever upgraded. Just a 64 that got lucky due to multiple submissions. Here's a case of the plastic being valuable, not the coin.
People undersell coins all the time, so "retail" to one could be a roaring rip to another. I recall a conservation with a major PNG dealer who I was trying to buy from. He told me a certain coin was priced at "retail," hinting that it was more than I would be willing to pay. I countered with, I pay "retail" quite often (and I do, for undergraded or underpriced coins). He then smiled as he countered with, but I want "retail, retail" for this one!.....his basic way of telling me he didn't want to sell the coin to me.
roadrunner
<< <i>Retailers do undervalue coins or don't realize the coin's potential or it being a lock upgrade. I recall one coin I bought from a major retailer here on the forum that was underpriced by at least 20%. I "flipped" it to a collector who needed it for is set. As it turned out, I underestimated it's value as well, and the collector sold it for a further 50% profit when he broke up his set a few months later. The CDN finally caught up on this coin and doubled the price about a year later. It took the blue sheet 3 more years to adjust their pricing. >>
Right. Some coins have real world pricing that defies the price sheets regularly, and anyone who has a slavish devotion to the price sheets won't ever be in the ballpark for them.
Try to pay close to sheet for a nice, problem-free early S-mint dime from, say, 1856 to 1867 in VF or EF condition. Chances are you'll have to double it to have a shot at it.
<< <i>"Rare coins are an "insiders" game, and newbies and the unknowledgeable generally get fleeced."
If you didn't understand this the first time, keep trying it until you getit...It's really true.
Good post!
Coin ON! >>
This is the most important point in the thread. Coin investors tend to be amongst the least knowledgeable and most gullible of coins buyers. The average coin investor has far less information than the average collector. Often they have zero grading skills and don't want to learn. The only "knowledge" of the market is in the information the salesperson feeds them. In the worst cases, the "information" is pure fabrication and has no bearing on the real world. This combo of inabilty to grade, and not knowing what real world coins trade at, is a recipe for losing LOTS of money in coins.
If the coin investor is extremely lucky they might find an honest dealer or honest salesperson that will not take advantage of their ignorance. If they are average they will find someone with a song and a dance that will take them for all they are worth. There are plenty of folks/firms out there willing to do that.
There is also the very ugly history of coin investing, with the Noe scandal in Ohio being the latest chapter--investors, beware. There are dozens of Noe-wannabes that have even less ethics and fewer contacts, out there looking for marks to play. Coin investors are the target audience.