Collecting as a form of investment
HJP
Posts: 423 ✭✭✭
The problem with “collecting as a form of investment” is knowing what to collect, that both appeals to you and has a decent chance of increasing in value (or at least holding its relative value).
What to collect is a choice we make. The choice of what to collect is an on-going process that changes over time and circumstance. Our collecting habits trend toward more expensive, higher quality, specialized “art” of particular type, style, date, series…etc. As we learn what we like to collect and start to acquire more of “it”, we must develop expertise in our areas of interest - if we want to improve our chances of making a good investment. Patience is usually a virtue, in terms of being able to realize a profit from your investments in “art”.
There are many joys of “art” collecting. I use the word “art” specifically to convey that coins, medals and banknotes are forms of art onto themselves. Most collectors derive pleasure from looking at the objects of our desire and displaying & showing these pieces of art to others. Many like to compare their “art” with the “art” owned by others. Great attention is paid to the most minute details - the sharpness of the strike, luster, surface quality, color, tone…etc. The descriptors we use to define the quality of our pieces of “art” have become, especially in the areas of coins, medals, banknotes and other similar “collectibles”, of paramount importance in terms of establishing a price range for a given piece of “art”.
Let’s take a look at what influences our purchase of coins, medals, banknotes or other forms of collectibles:
• At a basic level, coin & banknote collecting is about saving, storing, “holding”, and/or “owning”, different forms of money that is produced (for the most part) by a nation-state government. With the advent of modern “money” (circa ~1600) banknotes came into existence and were bestowed with a unit of value printed on the note, just as a coin has a unit of value stamped or otherwise permanently marked on the surface.
• It seems human nature drives some of us to collect “art” in the form of money, especially if it looks attractive to us and has interesting historical, political, religious or other significant events portrayed. Being made from silver, and especially gold has a big appeal to many people, not only coin collectors.
• Collecting as a form of investment is significantly different than collecting for the sake of collecting, hoarding or other non-investment related reasons. For coin and banknote collectors, if we start at a young age, we may all start out collecting for the sake of collecting. As we age a gradual transition from building date run sets, obtaining yearly mint sets, finding neat coins in change from the store and filling holes in a Dansco (or equivalent) album will usually shift to more specific areas of our interest as our finances allow. Some may choose to specialize, say in Buffalo nickels or Lincolns cents, or Washington quarters…etc. Others may seek much more esoteric, rare and more expensive objects d’art.
Various factors enter into our view of “what to collect”. To a large degree, a commonly accepted value range for a given grade of a particular coin, banknote, medal…etc. can be established based sales history and current collector demand (which can be fickle and transient). In the cases of non-monetary art and for monetary art which is unique (i.e. mintage 1), we enter into a different world of valuation, evaluation, presentation and most importantly, perception.
I'm recently back to attending this forum and hope to stimulate some interesting discussion on collecting as a form of investment.
HJP
Comments
At best, collecting is speculation not investing. I discourage anyone from even considering collecting as investing for two reasons:
All comments reflect the opinion of the author, evn when irrefutably accurate.
Collecting is simply a form of 'conspicuous consumption', no matter how you try to kid yourself.
LOL. While true, I prefer to think of it as simply "hobby consumption" unless you are running around showing off your trophy coins.
All comments reflect the opinion of the author, evn when irrefutably accurate.
@jmlanzaf Well, I don't do that. But some still do.
Q. How do you end up with a million dollars in numismatics?
A. Start with five million dollars (and hope that you get lucky).
For me, it's disposable entertainment spending. It will become an "investment" for my heirs, because whatever they can get will be free money.
For the millionth time, coin collecting is not investing. Ask Bill Hesselgesser about that.
"Seu cabra da peste,
"Sou Mangueira......."
my little hobby just make it fun and joyful.
Treat your coins like an expensive set of golf clubs, except don't wrap them around a tree.
I bought a $10 Library of Congress Bimetal in MS69 a few days ago for a bit under $900. These peaked at about $4000 a decade ago and now could be considered inexpensive as they are a low mintage type.
But plenty of folks paid 2 and 3 and 4 grand for the coin and if they auctioned it on Ebay they would realize a bit under $800 after fees. That is a hose job by any metric.
Whatever we do, it's fruitless without enjoyment. Investing is an art. I agree. Who has the most fun ? Whoever collects what they like.
``https://ebay.us/m/KxolR5
I have 8-10% of my net worth in gold.
An investment ? Yes.
I agree with Ray Dalio who believes (Founder of Bridgewater associates)... runs 150 billion in assets. He has been one of the most successful investors in the world.
His quote...
If you don’t own gold…there is no sensible reason other than you don’t know history or you don’t know the economics of it…
Hobby’s are supposed to be fun.
Coin collecting is a hobby (at least for me).
Since it’s fun I do not care about the future value of what I have in this hobby. Someone else can figure that out. I enjoy the hobby.
Fun money!
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Investments are fun when your on the + side, but it’s not a hobby, so I do care what happens in my investments.
Serious money!!
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I do not mix the two. Like trying to put diesel in a gas car. Not a good idea.
IMO
A hobby is not a monetary investment. It is an investment in your personal well-being and knowledge; that is were large profits can be accrued.
this is the question that keeps getting asked and the answers are always different but keep coming. asked in a year by someone else and the same members will answer and maybe/maybe not give the same answer.
I interpret many of the replies as "whistling past the Coin Show" in content.
perhaps we aren't investing in the most literal sense of the word. after having been here for awhile and seeing some of what we each own one thing is clear: for the most part we have an expectation of someday selling what we have and recouping the.............................investment, or at least part of it(pick a percentage). one point we all tend to be in lock-step about is that as a Hobby, we gain something from our collecting. it gives us joy, a feeling of pride and well-being, an outlet from the stressful pace of life and even companionship.
if I balance that against the monetary loss at the point of sale I believe I will be coming out ahead, everytime.
Considering current market conditions I don’t see collecting necessarily as investing. It’s a retail hobby like model trains. I have thinned my HO trains thru a local model RR hobby shop that takes consignments vs the hassle of fooling with that material on eBay.
However compared to a hobby like travel, entertainment venues where money spent is gone forever numismatics has its merits. Obviously making money is not a bad idea at the end of the day.
Where one has a hobby other than numismatics where that money spent is gone for good one must decide on a spending allocation between that hobby and coins.
Dave in coin club says “I decided collect just PCGS slabbed Carson City material bc my safe or bankbox only holds 5 slab storage boxes (max 100 slabs) and I don’t want hassle of liquidation of small ticket material. The PCGS inventory manager / registry super tool can manage from phone app.”
Don't invest. No matter how big a winner you are it is probably going to be a losing proposition. It's great to buy 20c coins and sell them for thousands but costs, time, effort, blood, sweat, and tears can still eat you alive. And you probably will have more fun without trying to profit.
This being said I would strongly advise younger collectors to seek collections of things that are out of favor and trade them for less popular collections when they get hot. You probably won't make much money but it's a great way to acquire fun and interesting collections for relatively little cost.
I consider "investing" in coin collecting expecting a monetary return to be a poor form of gambling.
Edited to add (with the exception of the educated whales, think TDN, who know what they are doing)
"Got a flaming heart, can't get my fill"
I would not describe as investment, but some coins, particularly gold, will always have a bullion value plus some measure of numismatic value. As far as hobbies go, I think it’s a good place to spend because they have liquidity.
Look at it this way... change your first paragraph..... the problem with investing is knowing what to invest in.... weather it be stock, precious metal, houses, antiques, foriegn currency, or baseball cards, the biggest and hardest part of investing is know what to invest in because nothing comes with a promise that it will be worth more one day
HAPPY COLLECTING
Re-post this to the stamps forum if you want to push some people's buttons.
I can always call Littleton and give them a shot at my estate.
You probably don't have nice enough stuff for Littleton.
Seriously.
"Investment" is a bit of a loaded term when applying it to rare coins as it is applied to other asset classes. Fine art, wine, classic cars are more of the type of investment shared with numismatic collectibles IMO.
Coins can appreciate and they are definitely a store of value, but trying to determine a type of coin, token or banknote, that is more apt to grow in value like other investment type assets is where it can go off the tracks.
Just buying a treasure at 2.25% and holding it 10-20 years is almost a certain guarantee of financial success over the purchase of rare coins or banknotes.
But what the hell sort of fun is that?
There are almost certainly an outsized percentage of buyers for this type of coin who are doing so for financial reasons, not primarily if at all for collecting.
I don’t think it’s unreasonable to have a small percentage of your total portfolio in unconventional areas. The joy of collecting (history, pride of ownership, interactions with fellow collectors & numismatists, etc.) might be your only real dividend, but that’s still something valuable.
If you even dream of “investing” in coins make sure you have a fully funded and well-diversified conventional retirement plan first. Then a backup plan. Then after that, have fun messing around with trying not to lose to much with rare coins.
Personally, I’m far better off financially to stick with efforts in my established profession, especially on an hourly rate. Coins are for fun.
The same way that dealers can collect from inventory, that is a good suggestion for those that seek to invest.
Instead of buying what you like, buy what you think will appreciate and collect from your portfolio
I have avout the same 10% in gold-common date SG and Liberty tens and twenties as well as several Indian fives, and AGE and buffalo gold cullion coins. I look at it as more of an insurance plan rather than an investment, though.
is no sensible reason other than you don’t know history or you don’t know the economics of it…
That is the way most financial analysts view it, although 5% is the more common number.
I'm also not sure I would ever consider bullion stacking to be equivalent to coin collecting. I mean, it has some elements, especially if you choose pretty gold designs over generic gold bars. But the whole point of bullion stacking is to buy bullion. If you are buying bullion with a significant numismatic premium, then you aren't stacking/investing/insuring.
As always, in my blunt but humble opinion.
All comments reflect the opinion of the author, evn when irrefutably accurate.
I think what you wrote is reasonable.
I also did not get a sense you were trying to compare to other investments.
😀
I like what you wrote.
What amazes me is the number of professionals in the coin biz who are NOT
diversified when it comes to their retirement plan.
I give away money. I collect money.
I don’t love money . I do love the Lord God.
I do not consider my coin hobby as an investment. I have seen high priced coins tank over the years....and vice versa. I collect because coins interest me and I enjoy owning and looking at coins. I know my firearms have appreciated in value far more than my coins, however, they were not an 'investment' (per the definition we seem to be using here) when I purchased them.... By another definition, most purchases are an investment of some kind, since one spends funds to obtain them. Normally, we consider an 'investment' to be a case where at a future date, we will realize a profit. That being said, we can invest time and money in pleasure - the non-monetary return on 'investment'. I will now go and invest some time (one of our most precious commodities - and the one most often wasted) on home improvement....
Cheers, RickO
Over time, the most successful people are ones who are passionate about what they do rather than ones who are only doing it for money. My best advice to someone who wants to invest in coins is forget about making money, pursue your passion for coins and that is the best chance for a successful "investment."
As far as I’m concerned, rare coins are an investment to whatever extent the buyer is motivated by potential profits. In other words the coin you buy “just to collect” could have been an investment if purchased by someone else.
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
To me, it's more for fun than anything else and it is a hobby where you do have something to show for it in the long run.
The "investment" part could be looked at this way: finding nice raw coins in rolls or at shops/shows and then submitting and getting that ultimate MS grade, then flipping it for many multiples of what you paid.
10-4,
My Instagram picturesErik
My registry sets
You might also be amazed at how few coin dealers ever retire.
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
Collecting is a form of savings, not investment. Some people may enjoy looking at bank statements, others would rather look at coins, cars, paintings, guns, guitars etc. Collectibles are an enjoyable way to park money. The "savings" can be cashed in when needed - and if you double your money you can boast about your smart "investment."
I do not plan on retiring. My work is fun for me.
Sounds bad, like we have to work our whole lives.
Well not really, being in business for yourself means that you get to do what you want to do every day of your life.
Tonight, I will be leaving on a trip to Mexico looking to catch Bluefin Tuna.
There are some interesting correlations between collecting & investing. I look forward to hearing what others think about this.
Bidask, indeed I'm not attempting to compare buying & holding coins, medals...etc. to buying & holding stocks, cars or real estate.
One of the pervasive issues in our hobby that warrants discussion is - What drives our interest to buy & hold a certain object of value & beauty? What motivates to pay large sums for little shiny coins that are made of gold or silver or copper or unobtainium?
HJP
This is the "secret" to all investment. People just want to buy when things are popular and the prices are high and then sell when it falls out of favor and prices are depressed. Misery loves company and people would rather be depressed with everyone else than happy alone.
Well, I just figure that if I like it when I buy it, chances are someone else will like it when it comes time to sell. It would be nice to break even or come out ahead, but I probably won't.
Collector, occasional seller
"Collecting as a form of investment"
ox·y·mo·ron
/ˌäksəˈmôrˌän/
noun
noun: oxymoron; plural noun: oxymorons
a figure of speech in which apparently contradictory terms appear in conjunction (e.g. faith unfaithful kept him falsely true ).
I think the informed and educated collector can make good long term buying decisions. The key is holding these coins for a long period of time. I sold a great collector/customer a coin 20 years ago for just over six figures that we got 7 figures for last year. Strict collectors make the best long term "investors" but they're not trying to hold or flip in a couple of years.
True long term collectors make the best investors in coins. I just read CNN said that. Here ya go folks two semi intelligent people agree.
I have always said, buy the best you can afford and hold
What you are describing is the difference between working and having a job. Your coin business is work but not a job. My job is a good one is many ways but it isn't something I would like to do forever. I do like working though and if I can transition to one that isn't a job, I'll continue to work to the end of my days, pay or no pay.
It is primarily if not entirely cultural. Look at the lack of or limited collecting practically everywhere else, certainly in coins. The explanation I have seen most often is that it is a financial limitation but it should be self evident this isn't the actual reason.
In the past, relatively poorer societies may have had difficulty being able to set aside coins for the future but even in the poorest, there have always been wealthy ones who could have done so but just didn't. In 20th century South Africa, there was certainly no shortage who could have saved the Union series in much larger numbers. They just didn't because it wasn't important to them.
Today where collecting practically doesn't exist, there literally isn't a single country where many more could do so and pay much higher prices. In the aggregate, the only reason they don't is also because they don't want to. For the individual, there may be some who are inclined but they have two big obstacles US collectors don't fully appreciate.
First, outside of circulating coinage, there isn't much to buy except low quality "dreck". The lack of collecting in the past means there isn't much to collect now. Additionally, most of the better (particularly scarcer) coins are owned elsewhere. The low price level or lack of price discovery also doesn't provide much of an incentive to offer what exists for sale in many instances.
Second, there is no local market to sell most coins into, most of the time. In the US, it's much easier to sell practically any coin because of the much larger and affluent collector base who collects everything. Most (potential) collectors aren't going to like collecting enough if they conclude it's mostly a sunk cost. They can still collect out of circulation but that has limited appeal due to the variety.
I would add to this thread that there is no one answer to all questions. Everyone is unique with different abilities. Personally I know of some collectors who have done very well financially with US coins. Not one of them posts on this forum. Usually anything worthwhile requires time and hardwork.