expert opinion wrong?
Gazes
Posts: 2,315 ✭✭✭✭✭
Over the years I have had read or been told by some of the foremost experts on coins that the strategy that makes the most sense is to buy the grade where you get the most value. In other words, if the coin is $4000 in MS64 and $18,000 in MS 65 then buy the MS 64 (just a random example). You get almost as much coin for alot less money. I know some dealers who do this for their own collections, books have suggested it, I believe I heard Bowers espouse this in a speech (he would also tell you to cherry pick the 64). Can't say I ever followed this strategy but I always thought it made sense.
Then I started to think about it. If you were thinking from just a return on investment, this strategy over the years probably is wrong (by the way, my thoughts have nothing to do with someone who collects what they like or has no concern about the return they get when they sell the coin). I thought about this when reading an article in the latest CDN where Jeff Garrett spoke about how top pops continue to get strong prices and if he had to start over he would have saved every outstanding lincoln cent, jefferson nickel, washington quarter, etc. he came across. I suppose the cliche "buy the best you can afford" may be closer to being accurate but even that may be just amended to "buy the best."
In other words, the idea of buying the top pops as a rule and paying more at the time would have done far better than "better value" coin. We have alot of cliches in numismatics and sometimes it pays to sit back and question them.
Comments
We're back to the issue: are you collecting or investing?
If you're investing, buy the thing that's going up. In that case, most coins are not going to keep up with stocks whether top pop or not.
If you're collecting, you are trying to build as satisfying a collection as possible which is why the value proposition you mention makes sense. If I can get 4 satisfying coins for $18,000 instead of the one $18,000 coin you mention, it makes far more sense.
The expert "opinion" isn't "wrong", you've just changed the question.
There are a great many cases in which top pop prices have plummeted, both on a relative and absolute basis. I think a good strategy is to buy great coins for the grade, whatever that grade happens to be.
Mark Feld* of Heritage Auctions*Unless otherwise noted, my posts here represent my personal opinions.
THIS!
I would also add that buying coins that satisfy you even if they are not the best "value" has merit. Sometimes a nice XF or AU coin has more character and charm than a 64 or 65 top pop.
One of my favorite U.S. coins in my possession is an XF/AU 1879 Indian cent that has really interesting toning that highlights the devices.
One of my favorite coins of any type is an AU 20 Srang gold Tibet coin from the Pittman collection. I've seen nicer. I even have a higher grade 20 Srang. But that coin has charm and meaning to me.
It's a hobby. Just do whatever makes you happy, even if no one else understands it.
Agree. Also buy the best that you can afford.
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
I kind of don't like that "best you can afford" theory. It makes it sound like you should always be stretching. I mean, maybe I can afford a nice AU set of Barber halves, but what's wrong with choosing to collect a nice XF set just because it is cheaper and just as satisfying to me?
I still like the adage “buy the best you can understand “.
While building my set 20+ years ago, I still have no regrets chasing and paying up for early date Walkers in AU and low MS grades, while being content to leave the mega grade late coins to others.
I understood those early dates were legitimately scarce and still are; fluid grading standards and an abundance of (at the time) raw late dates has swelled the pops of those mega grade coins.
Buy what you like... planning on coins for a long term investment, as a general rule, is not a good strategy. There are far better places for investments. Yes, it is nice to think that what you purchase 'may' increase in value...One hopes it will at least 'maintain' value....Neither path is guaranteed in coins.....Making money in coins depends on knowledge and fast turnover.....Good luck to all... Cheers, RickO
Can't disagree with that. My main point I guess is that any adage in the past to avoid the top pop coins and buy underneath them for value probably needs to be adjusted.
Before making a choice on the 64 or the 5 in your example, I would research the data on the 5s. and get really acquainted with other 5s look like and study price and sales history, last grading event and weigh against the buy opportunity. Depending on the circumstances, its always possible that a deal for the 5 may very well be made for something lower than what a price guide may show.
For me, with a price jump like that on one point it would have to be a WOW coin or something exceedingly special about it that makes the holder grade almost irrelevant, besides one less tick or something giving it a slightly higher technical grade. I would likely happily buy the 4, but wouldn’t rule out the 5 off hand without doing more homework.
Experts have cost me every dime.
``https://ebay.us/m/KxolR5
I always called the coins that made the big jump in price investment grade coins. In investment speak I would put it this way...the higher the grade and price the bigger the risk and opportunity over the substantially cheaper 1 grade lower coin.
Ha! I see the world of coin collecting this way.
From a 2017 Heritage press release, they sold $192 million in coins in 2017 and have a 56% market share in the coin auction business. Figure their cut at 15% or so.
CLCT which owns our host PCGS reported $20.2 million in revenues with a gross profit of 60% last quarter.
CCG, which operates NGC reports over $100 million in revenue last year.
I begrudge these companies nothing. Like all businesses, they exist to make a profit and they’re doing it splendidly.
The successful dealers (who provide a hugely valuable service) make a living each year. Some make a very comfortable living.
The only source of money that fuels all of this comes from collectors, as far as I can see. This money flows from collectors to these businesses continually.
Now, how exactly are collectors supposed to generate a return “investing” in coins???? That it’s ever possible is a minor miracle.
Collect for fun, with money you don’t otherwise need for basic needs and financial security. You can try to be smart about it, but let’s be honest here. Almost all collectors would be better off financially to put these funds in mutual funds or other traditional investments.
The real experts are of the opinion that it’s easier to make money from the hobby without owning the coins.
I’m with you on that. Buy what you like and hopefully based upon a sound foundation of knowledge.
Mark Feld* of Heritage Auctions*Unless otherwise noted, my posts here represent my personal opinions.
There is one aspect missing above.
that is error and variety coins.
You can interpret this any way you wish.
a nice error or scarce variety will always bring a nice profit, short time or long time, low grade or high grade.
It will depend on the buyers knowledge and experience to recognize such rarities. Often grade is not all that important. but it helps.
I know of no coins that’ “will always bring a nice profit, short time or long time, low grade or high grade.”.
Mark Feld* of Heritage Auctions*Unless otherwise noted, my posts here represent my personal opinions.
Buy the best COIN you can. There are AU coins that have better detail than some 63 versions.
I personally would purchase a well-struck AU..........even XF coin rather than a mushy looking MS coin any day.
Of course this doesn't apply to those collecting a set by grade.
Pete
you have not been looking hard enough! OR not buying right, as often you fond these coins in the junk box or simply as not recognized as what they are. some experience is needed in that section.
It's all opinions and personal preferences.
In honor of the memory of Cpl. Michael E. Thompson
You’re talking about cherry picking, which, as best I can tell, was not the subject of this thread.
Mark Feld* of Heritage Auctions*Unless otherwise noted, my posts here represent my personal opinions.
I'm with Mark on all of this. You want to buy top pops? Ask the guy who bought the finest known 53 S Full Bell Franklin Half for about $35K ten years ago or longer, only to have another 66 FBL 53 S Franklin made 18 months later, and lost 50% on said coin when he sold it shortly thereafter.
Unfortunately, per the above, unless you're dealing with pre 1835 material (the older the better in this example), a top pop can be a moving target.
That said, I bought a cherry 1831 Capped Bust Dime in PC 4 nearly 20 years ago for reasons mentioned above. Over the years, I've compared my coin to a number of them in MS 65. My coin was as nice as several of them, better than one of them. A big name crack out guy wanted to buy it from me. I've tried to upgrade the coin at least three times, and it's still in a PC 4 holder.
The bottom line is buy coins that are pleasing to your eye. And personally, I'd only stretch for a coin which sings to me; and I don't come across them often.
"Seu cabra da peste,
"Sou Mangueira......."
I have a 401K for my retirement. My coins are strickly a hobby if I loose money I will never really know cause I am like Ricko I dont sell. So my daughter will sell and she wont care the price cause to many coins to liquidate. All I care about is to take care of my Izzy and Moe Moe!
If you are buying coins to make money, you'll need luck and lots of experience. So either of the two suggestions MAY WORK.
@MFeld said: "I know of no coins that’ “will always bring a nice profit, short time or long time, low grade or high grade.”.
There are probably a few like that $65 SE that shall go unnamed.
Totally agree, sometimes the best you can afford is a poor economic value.
The sad part is that investing in coins and other collectibles was profitable for many years in the past and now the baby boom generation is seeing that it's no longer the case and in order to continue the joy of collecting we need to call it "just a hobby."
Investing in coins and collectibles, with rare exception was never profitable when compared to stocks over long time frames.
That is the current mind set; however, I refer you to all the books previously published in past decades recommending "alternative" investments.
The "investing" in coins comparison to stocks feels good to repeat over and over but it really isn't helpful. A few points:
1) Of course the stock market has proven over time to be an excellent investment but it assumes you didn't buy individual stocks, you didn't try to time the market, that you didn't get nervous and unload when the market plummeted, that you didn't sell stock to pay for other costs, etc. In other words, its very easy to say if you had put all your money into a S & P 500 index fund and left it untouched---you would have this much more money. The problem is that people make mistakes. Plenty people have lost money in the stock market being dumb. Plenty of people have made money in coins being smart.
2) An example---I was in an investment club in for about 7 years and we disbanded in 2008. The other day I found our portfolio from 2007. We owned $3000 worth of Netflix. If we had not disbanded it would be worth $300,000 today. The reason we disbanded was that a few guys got cold feet with the market plummeting in 2008, others needed money for homes, school, etc. Easier to look back and say if you did this... but in real life other factors come into play.
3) I love when someone posts what coin would you get if you were given a million dollars. Almost always someone says "none, I would invest it in stocks and then when it is worth 1.5 million I would buy a coin for $500,000 and keep the million." Well, the problem with that is if you view everything through that lens, you will never buy a coin because you will always feel like you can do better buying stocks. When you get to 1.5 million why would you buy the coin for $500,000----hold it longer and you will have two million, etc.
4) It is also cliche to diversify your investments. Can someone not invest in coins but make it just 5% of their net worth? So maybe we should not say never invest in coins---maybe there are ways to do it and be smart (and happy because we all love our coins).
My main point is at some point repeating over and over on a coin forum that stocks do better really is not that helpful. What is helpful is for someone to give knowledge that if someone does put money into coins (either as an investment or a hobby) here are the ways to give yourself the best opportunity to increase your value (best way to buy, attention to types of coins, quality of coins, use of a an expert or dealer, pricing, holding period, etc).
Coins is just a subset of the 'Antiques' business. When it comes to continuous, genuine price quotes, liquidity, and fungibility, coins can't compete with equities.
'Buy and hold forever' doesn't mean that you have no losses. It just means that the fates have been kind to you and that you aren't forced into unhappy reality.
I think it is funny that you would make this argument against stocks but not coins. Everything you say above also applies to coins as an investment. I'm not the one that inserted "investing" into this discussion. You may not like it, but every time someone mentions "investing" in the context of coins, I'm going to argue against it. A big part of that argument is the opportunity costs.
You don't want to hear about the stock market, don't mention "investing". I would be willing to make the same argument about bonds and coins, if you prefer that.
The ONLY way to make the investment argument for coins is to cherry pick your data. I bought 20 2019-S reverse proof silver eagles for $500 to $600 and sold them within days for $1000 to $1200. Yup, that performance beats the stock market. That performance also beats any premium coin you want to pick from 1804 dollars to 1913 Nickels to Proof CAC gold. But it is nothing but an outlier.
Invest in stocks and bonds. Trade gold and silver. Collect coins because you like them.
A great posting!
Q. David Bowers referred to having a budget of $5,000 to $10,000 per year in Chapter 2 - "How You Can Build a Great Collection" of his book "Inside The Rare Coin Marketplace." As the value of one's collection grows over a ten, twenty, thirty year span, one cannot ignore that a coin hobby has become an investment and more than just 5% of ones net worth.
I agree that what is helpful to the hobby is to share knowledge of ways to increase investment values.
"Coins" and "investment" should never be used in the same sentence ... especially in a market that is in a slow but steady decline as the collector population ages.
1) I didn't make an argument against stocks. I just said that repeated over and over and over that stocks do better than coins really isn't helpful on a coin forum.
2) You say I may not like it that you will bring up stocks when people mention investing----I could care less. You can post a hundred threads about stocks vs. coins. My point is I don't think those posts are useful. Much more useful are threads that discuss how to get the most out of your coins whether they be an investment or a hobby.
3) I also tried to point out that it helps to sometimes think out of the box rather than parrot cliches. For instance, how about investing 5% in rare coins, how about investing in coins that leads to being a dealer (I have been to the homes of some dealers who coins have made a fortune in buying and selling rare coins, ), etc. Again, a simplistic approach of saying only invest in stocks and never coins is not very helpful.
Again, no one is arguing that stocks generally do better than most coin purchases but I think 99% of the people on this forum know that. However, 99% of the people on this forum enjoy coins and would probably appreciate advice on buying coins and not the stock market.
My comment was made in direct response to a poster who was bemoaning that coins used to be an investment and aren't anymore. I did not insert "investment" into the discussion. I also wasn't responded to your original post.
By the way, dealers don't "invest" in coins - they trade them. Some chefs have made a lot of money off their restaurants, that doesn't make cooking an investment.