When should a rare coin be considered an investment?

Cameo CC · November 10, 2003 9:56PM

In the November 11th, 2003 issue of Numismatic News (page 38), David L. Ganz writes a interesting article about when does a coin or coins fall under the Federal Securities Act of 1933 and the Securities and Exchange Act of 1934. He states that several legal actions have occurred, “arguing that they should have registered them as a regulated security”.

He sites several cases and the results are mostly against those who do not register rare coins as in investment. The penalties are substantial, “since it allows for a contract to be rescinded long after the event in question – or criminal, which means that the seller who has failed to register can actually find a prosecutor seeking to impose a jail sentence for the “crime” of selling unlicensed, unregistered rare coins”.

I think that bottom line is should one tell people that a rare coin is an investment or, as I think, the rare coin is a collectable and one should buy it for the love of having the coin and not as a investment.

What are you thoughts?

Todd

BillJones · November 10, 2003 10:51PM

My opinion is that people should buy coins for the enjoyment of it. While its true that some people do realize a profit on their collection when they sell, most of those who do well were primarily collectors. I've never bought a coin for my collection because I thought that I could make money on it. I bought it because I wanted to own it for whatever reason. Of for the business I buy coins with the expectation of selling them at a profit.

I NEVER tell customers that they should be buying coins to make money on them. I discourage comments like, "This is a good investment," or questions like, "Is this a good investment?." Collectors often do much better financially that people call themselves "coin investers."

As for registering coins as "investments," I am totally opposed to that. Mr. Ganz and his coharts would love to tap into the investment market in a big way, but as a collector and a dealer who prefers to work with collectors I would oppose that.

pontiacinf · November 10, 2003 10:52PM

Buying for any reason other than collecting is stupid. Only solid invest IMHO would be real estate. Rare coins are a wonderful things that should be bought outta love, not for profit potential.

Before ya cry wolf ask a bank if they will lend you cash against your coin collection....

hhahahahahahahahahahaha

pontiacinf · November 10, 2003 10:53PM

Bill i didnt see your post, I find you to be a very honest man and wish you did buiness in my neck of the woods.

so there you see, from one of the best....

cointagious · November 10, 2003 10:57PM

<< When should a rare coin be considered an investment? >>

only when you buy from a person licensed to sell securities.

BAJJERFAN · November 10, 2003 10:58PM

When you expect to be able to sell them for more than you paid for them.

Cameo CC · November 10, 2003 11:09PM

Over the five years I have been involved in the coin industry, I have had several contacts asking me whether or not this coin or group of coins is a good investment. I have always told them that if they are buying coins as an investmetn that they should not buy them.

It is true that some coins do increase in value, especially in the last several years (for example the 1995-W Silver Eagle), but this is not the norm. Most of the people I talk to buy for the joy and love of collecting. They enjoy the hunt for the coin or the idea of having a complete series set in the grade they desire.

I think some telemarketing firms and/or TV sometimes represent buying there coins will automatically realize an increase in value. This is unfortunate.

More importantly, what is considered a rare coin - Low certified population, high grade, low mintage, eye appeal or type coin – for that matter all of the above?

Todd

Wolf359 · November 10, 2003 11:13PM

When is a rare coin an investment? When you cannot get your money back selling it!

pontiacinf · November 10, 2003 11:17PM

I would think a modern could be rare if a confirmed error (like 71 no s jeff) or such. Otherwise when I hear the word I think of bust halfs n dollars and seated material n such. I absolutly love patterns, but those are out of my league.

paulheep · November 10, 2003 11:20PM

I see a coin on e-bay selling way below market. I buy it with the full intention of reselling the coin at a profit. Would you call this an investment or "just got lucky"?

Paul

nucklehead · November 10, 2003 11:48PM

Seems to me coins like the Lincoln 55 DDO,the 1937-D three legged buffalo nickel or even the Murcury 1016-D dime are pretty good investments as I've never seen them decrease in value.

MrEureka · November 10, 2003 11:55PM

I know what I'm doing and feel very comfortable investing in coins. When I buy a coin for investment purposes, it IS an investment. Nevertheless, the seller is NOT selling an investment. He is selling a coin. He should not be required to register as a securities dealer.

On the other hand, if he is pitching coins as an "investment" to the uninformed, he is in dangerous waters.

JoyofCollecting · November 10, 2003 11:59PM

It's only an investment when you are trying to convince your significant other to let you spend the money on it.

nucklehead · November 11, 2003 12:03AM

<< It's only an investment when you are trying to convince your significant other to let you spend the money on it.

>>

Very true and a good point.

shirohniichan · November 11, 2003 12:04AM

<< It's only an investment when you are trying to convince your significant other to let you spend the money on it.

>>

The other time is when you're trying to convince someone to buy it from you.

Baley · November 11, 2003 1:14AM

Coins are collectibles, just like stamps, trading cards, antiques, art, beanie babies, or memorabilia with coca cola or mickey mouse or elvis on them. Sure they have market value, which fluctuates, and lots of people make money buying and selling them. some people lose money buying and selling them.

But any attempt to formally "investmentize" them or regulate their trading is full of pitfalls and likelyhood of fraud, and is doomed to failure.

BillJones · November 11, 2003 2:11AM

What gives a coin value. A part of the value, often a small part for a true collectable, is the metal that it contains. Beyond that it is the enjoyment that the collector gets from owning.

Pure investers only get enjoyment from selling something for more than they paid for when it yields a rate of return higher than or equal to other investments with similar risks. When coins reach prices where they are only trading between investers because their prices have gone higher than collectors are willing to pay, a crash is not far in the offing. This happened in the late 1980s to the "old" commemorative coins in high grades. It will happen again in this market if the investers, which I would prefer to call speculators, take a major position in one or more areas of the numismatic market.

FrattLaw · November 11, 2003 2:14AM

<< should one tell people that a rare coin is an investment >>

Yes, and make sure to tell my wife that as well, repeatedily!

Michael

LAWMAN · November 11, 2003 2:20AM

Don't market coins or anything else as an investment. Don't prepare charts and graphs showing expected performance. Just sell coins as collectibles and you should be OK under the securities laws. The problems came during booms in 79-80 and 89-90 (not sure of the dates on the second one) when the Wallstreeters got involved and were actively marketing investment portfolios. I defended a case in the early 80's where an attorney put his pension heavily into a 'rare coin portfolio' at the height of the 79-80 boom, then the crash came, and he sued everyone in sight in an almost 100-page complaint filed in US District Court in LA, alleging every kind of securities violation under the sun. It wasn't a pretty sight.

09sVDB · November 11, 2003 8:48AM

When the only reason you buy it is to make money.

oreville · November 11, 2003 9:19AM

09sVDB: I would rephrase that to "when the PRIMARY reason you buy it is to make money."

I have personally found that when trying to buy coins because you "know" you can make $$ on it turns out to a bad move. I personally find that it is best to hear the "sirens" of the collecting "heart" and follow my collecting instincts as it pleases me. Usually, it seems to eventually please someone down the road even if it is 10-15 years later or more. That almost always protects your downside in that case.

razorface1027 · November 11, 2003 9:30AM

Each and every coin in my COLLECTION is rare, only to me of course, because I paid TOP DOLLAR to acquire them...

Elcontador · November 11, 2003 10:05AM

Not many people try to get more value for their $s than I do. Still, I expect a dealer to make between
10-20% on a coin I purchase from him / her. If you invest this way, you'll go broke in a hurry.

If you expect to make more than 10% in a year from an investment, you are not investing your money, you are engaging in speculation in a volatile market. The coin market can be volatile because it has many segments which are thinly traded.

This is why coin collecting is a hobby for me. Before I made my last major purchase, I made sure
my mortage was taken care of, major work on the house was not needed, I had already taken my
vacation, new purchases for the office were accounted for, and that I'd have enough for my pension plan contribution BEFORE buying the coin.

RGL · November 11, 2003 10:13AM

... when it costs more than you can really afford to spend.

nwcs · November 11, 2003 10:33AM

I think a distinction needs to be made between coins that are truly hobby and collectible sorts and those that are more investment oriented. Sure, there is a gray area, but really there are some coins that are 90% investment and only 10% true hobby. And there are coins that are 100% hobby. For example, no one can tell me there is no investment concept behind any key date coin bought. Sure, there is some hobby part, but it's really an investment, too. But no one can tell me a 1945 VG lincoln is an investment. Except on ebay.

wallstreetman · November 11, 2003 11:17AM

<< 

I NEVER tell customers that they should be buying coins to make money on them. I discourage comments like, "This is a good investment," or questions like, "Is this a good investment?." Collectors often do much better financially that people call themselves "coin investers."

>>

Of course not, then they would want to pay what you paid!

nwcs · November 11, 2003 11:21AM

>When should a rare coin be considered an investment?

Here's a sliding scale answer. How about that it should be considered an investment at the moment you have to think about spending the money (that is, when you strongly consider the opportunity cost or benefit of the purchase) instead of it being trivial (for example, buying a candy bar is trivial).

coinkat · November 11, 2003 11:34AM

The term "rare coin" would need to be defined... even then I really don't like where this is going... more regulation to protect people from themselves.

Skipper53 · November 11, 2003 11:50AM

Rare coins,by their own definition, imply a scarcity that can obviously be viewed as
a potential investment.
A collector who aquires a rare coin with no thought of appreciation in value, but rather
the pure joy of ownership, has probably reached a level a affluence that makes the
thought of selling the coin at a profit irrelevant.

However, the person who is attempting to build a portfolio of various investments,ie.
stocks, bonds, precious metals, etc., may find the potential in rare coins no riskier
than many other areas.

When should a rare coin be considered an investment?

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