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I'm blogging on "collector science" and flipping
WestySteve
Posts: 567 ✭✭✭
OK, I post here quite a bit. Mods if you'll indulge me and leave this up here for just a little while before you take it down. I have some good armchair reading about collecting coins and flipping there.
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The blog posts the newest post first, so use the "bus stop" to find the oldest post (bottom of bus stop)
EXERPT:
CHAPTER TWO
ARGUMENTS AGAINST COLLECTIBLES AS AN INVESTMENT:
If you do your research, I’m sure you’ll find those who disagree with buying collectibles as an investment. These well-intentioned people will say that you should buy collectibles because you like them and not as an investment because people seldom make money with investments. They will cite many reasons why investing in collectibles might be unwise, such as:
It is difficult to determine the market value of these items: You can overpay.
You have to have specialized knowledge to invest in collectibles: For every one winner in collectibles, there are often a large number of losers and it takes specialized knowledge to know one from the other.
You can break or lose them: What if you buy a rare item and break it? Or lose it? Or it burns up in a fire?
Collectibles don’t pay off until you sell them: They don’t pay dividends.
Collectibles aren’t liquid: They are not easy to sell.
And do you know what? They are right about all of these! Just like any other form of investing, there are risks involved. Let’s look at them one at a time:
It is difficult to determine the market value. Let’s give ourselves some credit here. The fact that you’re holding this book in your hands automatically puts you in a different class than the potential investor this advice is aimed at. You do your homework. Collectibles do require homework. You will need to do homework not just to prevent losses, but also to maximize gain. But here’s a tidbit; unlike highschool, homework can be fun! You can, and should, start off slow, and use some of the ideas contained within this book. By learning prices and purchasing items in a competitive environment you likely won’t overpay. Overpaying is a real risk, but it can be overcome with education.
You have to have specialized knowledge to invest in collectibles. Yes you do. You also need specialized knowledge to invest in stocks or real estate. But should we avoid investing in stocks and real estate because we’re not real estate professionals and stock brokers? Of course not. Instead, we need to educate ourselves to invest in collectibles too. This book will give you a jump start on gaining that specialized knowledge. It will highlight what you need to look for, and where you need to look. In preview, one fo the things we’ll learn is to buy the collectibles that are already established “winners”. Read this book twice and do some window shopping first before you start investing. Start off slow, apply the principals in this book and you’ll be fine.
You can break them or lose them. Yes. Yes you can. That is why we have insurance and safety deposit boxes and why we must use caution when handling our collectibles. If you don’t already know this, you will quickly see that amount of care you will take with an object is directly proportional to the amount of money you have invested in it. This is because the state of preservation is a key component in the valuation of better collectible investments. So, yes, collectibles do exhibit this type of risk, but all investments have risk of some kind. If you elect to avoid collectibles because of the risk that you might drop it or damage it, you will be transferring that risk to someone else. So the alternative to “collectible damage risk” is the risk associated with giving your money to someone else and making them responsible for growing it. Personally, after being an unwilling participant in the recent Wall Street meltdown and watching land values turn upside down in a foreclosure crisis, I am as comfortable trusting myself not to break a collectible when I carry it from Point “A” to Point “B” as I am to trust someone else to invest my money wisely. There will always be risk in investing.
Collectibles do not pay off until you sell them? That’s true. But this is also true of other asset classes such as land purchased on speculation and many common stocks that purposefully do not pay a dividend for tax considerations. Just because an investment does not pay dividends does not mean it is a poor investment. The yardstick with which to judge an investment is it’s rate of return and by this measure, collectibles perform admirably. Further, in some ways, collectibles are superior to non-dividend asset classes such as land or some common stocks because they can be portable and leave little or no paper trail. In perilous economic times or even adverse political times, this is a side benefit that is worth your consideration.
Collectibles are not liquid? This is partially true. Liquidity of assets has significantly improved due to the creation of local and national internet sales sites. Irrespective of the greater liquidity that has been created by the internet, some collectibles are definitely not liquid, but some are liquid. Whether a collectible is liquid or not is dependent on its popularity, rarity, and condition. It could take months to sell a rare automobile worth over $1 million. It could also take months to sell an inferior collectible without a deep discount because collectors are picky and are more hesitant to purchase common items unless they are deeply discounted. However, some collectibles are relatively liquid if they fall in a price range that does not create significant price resistance and they are otherwise very desirable. So the bottom line is that the collector should stick to items relatively unaffected by price resistance and that are popular, rare, and in a nice enough condition to command the attention of other collectors when they come up for sale. Education is plays a large role here. Most importantly, however, the collector needs to recognize that collectibles, like some other asset classes such as real estate or even a certificate of deposit may not be easy to cash out without selling at a discount. With the exception of items bought on speculation, collectibles are generally a long-term asset and profit will be maximized when great care and patience is exercised when it comes time to sell them.
You may notice that there is one potential argument against collectibles that is not listed here. The rate of return of collectibles as an investment is seldom called into question except, perhaps, by the uninformed. Over the long run, well selected collectibles handily outpace inflation and returns of more than 10% is relatively common for the better material.
blog
The blog posts the newest post first, so use the "bus stop" to find the oldest post (bottom of bus stop)
EXERPT:
CHAPTER TWO
ARGUMENTS AGAINST COLLECTIBLES AS AN INVESTMENT:
If you do your research, I’m sure you’ll find those who disagree with buying collectibles as an investment. These well-intentioned people will say that you should buy collectibles because you like them and not as an investment because people seldom make money with investments. They will cite many reasons why investing in collectibles might be unwise, such as:
It is difficult to determine the market value of these items: You can overpay.
You have to have specialized knowledge to invest in collectibles: For every one winner in collectibles, there are often a large number of losers and it takes specialized knowledge to know one from the other.
You can break or lose them: What if you buy a rare item and break it? Or lose it? Or it burns up in a fire?
Collectibles don’t pay off until you sell them: They don’t pay dividends.
Collectibles aren’t liquid: They are not easy to sell.
And do you know what? They are right about all of these! Just like any other form of investing, there are risks involved. Let’s look at them one at a time:
It is difficult to determine the market value. Let’s give ourselves some credit here. The fact that you’re holding this book in your hands automatically puts you in a different class than the potential investor this advice is aimed at. You do your homework. Collectibles do require homework. You will need to do homework not just to prevent losses, but also to maximize gain. But here’s a tidbit; unlike highschool, homework can be fun! You can, and should, start off slow, and use some of the ideas contained within this book. By learning prices and purchasing items in a competitive environment you likely won’t overpay. Overpaying is a real risk, but it can be overcome with education.
You have to have specialized knowledge to invest in collectibles. Yes you do. You also need specialized knowledge to invest in stocks or real estate. But should we avoid investing in stocks and real estate because we’re not real estate professionals and stock brokers? Of course not. Instead, we need to educate ourselves to invest in collectibles too. This book will give you a jump start on gaining that specialized knowledge. It will highlight what you need to look for, and where you need to look. In preview, one fo the things we’ll learn is to buy the collectibles that are already established “winners”. Read this book twice and do some window shopping first before you start investing. Start off slow, apply the principals in this book and you’ll be fine.
You can break them or lose them. Yes. Yes you can. That is why we have insurance and safety deposit boxes and why we must use caution when handling our collectibles. If you don’t already know this, you will quickly see that amount of care you will take with an object is directly proportional to the amount of money you have invested in it. This is because the state of preservation is a key component in the valuation of better collectible investments. So, yes, collectibles do exhibit this type of risk, but all investments have risk of some kind. If you elect to avoid collectibles because of the risk that you might drop it or damage it, you will be transferring that risk to someone else. So the alternative to “collectible damage risk” is the risk associated with giving your money to someone else and making them responsible for growing it. Personally, after being an unwilling participant in the recent Wall Street meltdown and watching land values turn upside down in a foreclosure crisis, I am as comfortable trusting myself not to break a collectible when I carry it from Point “A” to Point “B” as I am to trust someone else to invest my money wisely. There will always be risk in investing.
Collectibles do not pay off until you sell them? That’s true. But this is also true of other asset classes such as land purchased on speculation and many common stocks that purposefully do not pay a dividend for tax considerations. Just because an investment does not pay dividends does not mean it is a poor investment. The yardstick with which to judge an investment is it’s rate of return and by this measure, collectibles perform admirably. Further, in some ways, collectibles are superior to non-dividend asset classes such as land or some common stocks because they can be portable and leave little or no paper trail. In perilous economic times or even adverse political times, this is a side benefit that is worth your consideration.
Collectibles are not liquid? This is partially true. Liquidity of assets has significantly improved due to the creation of local and national internet sales sites. Irrespective of the greater liquidity that has been created by the internet, some collectibles are definitely not liquid, but some are liquid. Whether a collectible is liquid or not is dependent on its popularity, rarity, and condition. It could take months to sell a rare automobile worth over $1 million. It could also take months to sell an inferior collectible without a deep discount because collectors are picky and are more hesitant to purchase common items unless they are deeply discounted. However, some collectibles are relatively liquid if they fall in a price range that does not create significant price resistance and they are otherwise very desirable. So the bottom line is that the collector should stick to items relatively unaffected by price resistance and that are popular, rare, and in a nice enough condition to command the attention of other collectors when they come up for sale. Education is plays a large role here. Most importantly, however, the collector needs to recognize that collectibles, like some other asset classes such as real estate or even a certificate of deposit may not be easy to cash out without selling at a discount. With the exception of items bought on speculation, collectibles are generally a long-term asset and profit will be maximized when great care and patience is exercised when it comes time to sell them.
You may notice that there is one potential argument against collectibles that is not listed here. The rate of return of collectibles as an investment is seldom called into question except, perhaps, by the uninformed. Over the long run, well selected collectibles handily outpace inflation and returns of more than 10% is relatively common for the better material.
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You may notice that there is one potential argument against collectibles that is not listed here. The rate of return of collectibles as an investment is seldom called into question except, perhaps, by the uninformed. Over the long run, well selected collectibles handily outpace inflation and returns of more than 10% is relatively common for the better material. >>
I know plenty about investments. However, unlike most on the Internet, I tend to look at what average people can expect, not the top performers, not the best of the best. Sure the top coins have done very well, as have the top stocks or stock pickers, or other top performers in any realm. The experience of the average well-informed collector can be very different. I'd advise the readers, don't believe what you read on the Internet. It tends to bring out mostly braggart winners and a few liars. The losers tend not to report their results in public, or reply to polls.
Excluding bullion which is a separate class, numismatic coin buyers have had mostly mixed results. Sure a few categories have done very well, but that offers little indication as to future results. Most uninformed Internet educated investors tend to follow the crowd and buy what did well in the past, often turning out to be the worst performers for the future--that is a harsh and unavoidable reality of the way markets work. Dumb money is greedy and uninformed. They tend to buy the latest fads, and tend to lose money. It is the way of the world.
I think any real study of all coin buyers, would find most numismatic coin collectors are doing well to break even after five years. I'm not talking dealers, collectors. If a person only looked at pure numismatic investors (again not dealers), I'd guess overall they lost money. Why? Because pure coin investors tend to be the least informed in terms of coin knowledge.
As always, with coin investments, I go back to what I always write. There are a few that do well. They tend to share certain traits: superior access to coins, superior grading skill, superior market knowledge. Be above average in all three and that person will tend to do well, but that group is the top 20% in terms of skills. The middle group of average hobbyists, which are well informed, but don't have any special talent or access, and that group is tends to be at about break even after five years. Be below average in all three, as many pure coin investors are, and that person will almost certainly lose money.