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a different view on coin investing

A talk with my accountant made me think about some advice that is given for investing in coins that is generally considered untouchable.
The accountant made a big point of figuring out the very smallest quarerly payment I could make without penalty. I told him that I would probably owe at the end of the year and he said that is fine but you want to keep that money until you have to pay it. Yes, that makes perfect sense---pay only what you need to and use the money until you need to pay the rest. One problem---I sleep better if I don't need to pay money at the end. Further, the gain is very small---interest rates are so low. Also, what if I am tempted to spend that extra money and get stuck with a big bill at the end of the year. In other words, theoretically paying the lowest amount is the best move but depending on each person's habits and mindset---one may be better just making sure it is all paid up even if they pay more than they are required to for quarterly payments.
Which brings me to coins. The wisdom is that one should generally not use coins as investment, make it a hobby, only purchase coins after everything else is paid for and retirement and all other investments are satisfied, etc. Generally stocks perform better, etc. Assume money put in coins is gone. I can't disagree with all this in a setting where the collector acts rationally.
However, like the example above, we don't always act rationally. For instance, there are people who will simply not invest in the stock market. They will take their extra funds and do other things with the money. Money that could be invested can be used a number of ways---expensive vacations, eating out a lot, casinos or the track, expensive clothes, expensive hobbies (not including coins), expensive cars, and the list goes on and on.
So one must know themselves. And if you are not someone who has the disciplined to follow the advice of paying all bills and retirement and investments----then investing in coins may not be a bad choice. If someone is going to spend their money on something that at the end of the day leaves them with little or nothing---coins are far better. One can spend quite a bit on a gold type set. Buy PCGS and even CAC if they wish. Maybe they lose 25% when they sell. Maybe break even. Maybe it is up 4% or more. But you will do better than the expensive clothes, vacation (monetarily speaking), gambling, etc.
My only point is there is one rule for perfectly rational behavior. But if you know yourself and you won't follow it--and coins bring you enjoyment---its not a bad option.
The accountant made a big point of figuring out the very smallest quarerly payment I could make without penalty. I told him that I would probably owe at the end of the year and he said that is fine but you want to keep that money until you have to pay it. Yes, that makes perfect sense---pay only what you need to and use the money until you need to pay the rest. One problem---I sleep better if I don't need to pay money at the end. Further, the gain is very small---interest rates are so low. Also, what if I am tempted to spend that extra money and get stuck with a big bill at the end of the year. In other words, theoretically paying the lowest amount is the best move but depending on each person's habits and mindset---one may be better just making sure it is all paid up even if they pay more than they are required to for quarterly payments.
Which brings me to coins. The wisdom is that one should generally not use coins as investment, make it a hobby, only purchase coins after everything else is paid for and retirement and all other investments are satisfied, etc. Generally stocks perform better, etc. Assume money put in coins is gone. I can't disagree with all this in a setting where the collector acts rationally.
However, like the example above, we don't always act rationally. For instance, there are people who will simply not invest in the stock market. They will take their extra funds and do other things with the money. Money that could be invested can be used a number of ways---expensive vacations, eating out a lot, casinos or the track, expensive clothes, expensive hobbies (not including coins), expensive cars, and the list goes on and on.
So one must know themselves. And if you are not someone who has the disciplined to follow the advice of paying all bills and retirement and investments----then investing in coins may not be a bad choice. If someone is going to spend their money on something that at the end of the day leaves them with little or nothing---coins are far better. One can spend quite a bit on a gold type set. Buy PCGS and even CAC if they wish. Maybe they lose 25% when they sell. Maybe break even. Maybe it is up 4% or more. But you will do better than the expensive clothes, vacation (monetarily speaking), gambling, etc.
My only point is there is one rule for perfectly rational behavior. But if you know yourself and you won't follow it--and coins bring you enjoyment---its not a bad option.
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Comments
"Got a flaming heart, can't get my fill"
I like to keep my meaningful investments distinct from my leisure activities. Things are simpler this way.
And that is consistent with my point--you have to know yourself. So for you, coins should not be an investment.
Just to add to my original point. I have an Uncle who is a doctor who makes a lot of money. He lives quite the life. Only 5 star hotels, a new Merceds every two years, country club, and some horrible crazy investments. In his situation, buying coins would have been much much better financially. As it is, he is in his 70s and will work til he dies. If his hobby and been coins he would have had a nice nest egg and enjoyed the pursuit too. Not great advice for everyone but for him it would have been.
At the same time, I am the senior partner of a financial advisory team with a major national investment firm. So part of me has to look at the investment potential of the more expensive (whatever that means) coins I buy. I suppose it is in my DNA. I am not financially able to compete for extremely high end coins such as those from the Pogue collection. One must (or should) admit that the long term investment potential of uber high end coins of that sort is good. It could be as good or better than the average stock. Not the best performers, but the indices.
I am hoping that the coins I can afford and have bought will at least be worth more when my kids sell them when I die. Coins currently in my box of 20 cost from $40 to almost $4000. Even my more expensive coins are without a doubt several steps below Pogue / Gardner / Duckor , etc. They are, however, better than average. I know collectors who would never seriously think about spending $4000 for a coin. I know some that would probably consider my $4000 coins as "stuff".
That said, coins which most of us can afford should be looked at as pleasure to own. They will not perform as well as an intelligently designed investment portfolio. They just won't. Certainly the financial returns will be better than a high end non-collectible car, which is a depreciating asset, or expensive vacations. Hopefully you or your heirs will be able to get your money out of them 10-20-30 years from now.
In my opinion, one should save diligently and invest in a portfolio of stocks, bonds, and alternative investments. This portfolio should seek a combination of capital appreciation and income for reinvestment. It should be custom designed based on one's needs, risk tolerance and time horizon.
Get help developing a strategy to maximize the likelihood that you and your family will have enough for a comfortable retirement lifestyle. Saving much more than calculated as necessary involves too much personal sacrifice. Not saving enough puts one's lifestyle at risk.
A qualified and competent advisor can help do these projections. If he or she can not, then you are probably talking to the wrong person. Seeing these numbers can offer some peace of mind!
Once all of that is done and you are fairly confident that you can live as you wish in retirement or maintain that lifestyle if you are already retired, GO BUY A NICE COIN!