Buying extremely valuable coins... a good investment?

While I understand the sentiment, if you are spending big money on coins you can't avoid the investment aspect, it becomes automatic. I would consider it foolish to deny that fact. Whenever I buy a coin, I always consider the financial implications and possible loss at time of sale. I do this with every coin, even those worth only $100. Because before you know it, you have accumulated 100 $100 coins in your collection and have unintentionally invested $10K in coins.

The only way to avoid investing in coins while collecting is to follow Doug's method, don't buy any!

 

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Completely agree. This is a big thing that intrigues me in coin collecting. It's not like spending money on clothes, electronics, etc... that typically only lose value. There is the real possibility of it staying constant, gaining value or being worth quite a bit more than you paid for it (more immediate sense, getting that profit if you decide to resell).

 

OP, I wasn't sure if you were still paying attention to this thread until the above post. I am curious what your level of experience/expertise with coins already is. Most who consider $50K coins (or antiques, paintings, etc.) work their way up.

 

My experience is relatively low, however it didn't make much sense that the coin was being offered for $20k less than the last known auction (with Buy it Now). I would think they would try and go to auction with it (heritage, etc...) where the sale of higher value coins might realize more towards their true value. I think that $50K+ is probably too much for that coin to begin with, however I don't think ebay is the best place to get true value. Additionally, I don't know that the person on ebay is even the one who got it from Heritage... They might have bought it from that person at an even lower cost and are making a profit at $35k.

However, it is interesting to note that the coin in question was removed from ebay not long after it was entered. Not sure if they realized the price discrepancy or something.

I wouldn't say that I'm necessarily in the market for this type of expensive coin, at least not right now. Does anyone here actually have experience in the subject (ie: buying and trying to sell coins of this cost years later) or is everyone mostly speculating?

 

I completely agree with what you are saying. I think the point I was trying to get across is it is a conflict of interests to combine a hobby and investment IMHO. While I always consider the re-saleability of a coin when I purchase it, I don't like the idea of my financial future partially dependent on my coin collection. I want the security of being able to sell the coin if I choose too...but I don't want my finances dependent on needing to sell a coin.

 

Agreed, and until I lost my job last year, my finances were not dependent upon the need to sell a coin. But life throws you curve balls, the best way to handle them is to know that they are coming and prepare for when they do. Financial prudence dictates that those with more than $10K in coins consider the financial implications of their investment. I just learned the hard way that it is not a good idea to have 50% of your net worth in coins. I didn't lose a whole lot during my sale process but I attribute that to the fact that I am able to generate income from playing poker as well.

 

While I commisurate with those that may be put into a position to sell, my advice would be to never invest "investment" money in coins to begin with. I spend hobby money on coins. Yes, some day my wife will sell them when I take a dirt nap, but I always put at least 5 times as much each year in investments than I ever would put into coins.

I know its hard to invest only in investments and not get drawn in by dealer siren songs that you can own this rare coin you have always wanted, and still be a prudent investor. Unless you know what you are doing, like Paul, most people will lose money in this idea.

I still say a hobby should only eve have hobby money spent on it. You should be willing to be able to flush all the money you spend on coins down the toilet and not affect your life. If not, I say you have entirely TOO MUCH MONEY in coins.

Of course, this is not including junk PM coins, which can be part of an overall balanced portfolio for PM investment purposes.

 

The person that bought and sold that coin is most likely a dealer, he is selling more high dollar coins, including a 1895 PR68 dollar that is asking for $108k

 

For all anyone knows, it could have been a hijacked ebay account selling a coin they don't own and stole photos of. Just to get some sucker to pay them some money.

 

The seller got good feedback, and sold a $92k coin last month.

 

I certainly don't have experience with coins of that caliber, but I buy decent coins and, as others have pointed out, it would be foolish not to consider the investment consequences (i.e., downside risk) or have too much of your worth in coins. This topic gets batted around on CT occasionally and it seems the consensus is that, while selling coins will sometimes net a profit, coins rarely outperform other, more traditional investments. Personally, I hope to break even on my collection some day; anything else will be gravy.

I agree that the seller is likely a high-end dealer.

You might want to check out other forums such as Collector's Universe http://forums.collectors.com/categories.cfm?catid=26; maybe a few collectors there can give you good feedback.

 

For every example there's a counter-example.

Consider this guy. He bought a $20 St. Gaudens for $500,000 in 1979, held it for a short time and sold at a loss. Coins are therefore a bad investment you say! Not so fast. That St. Gaudens is worth $15M today. As they say it's not timing the market it's time in the market.

http://www.washingtonpost.com/local...-collections/2012/06/10/gJQAouh5SV_story.html

 

That is not an accurate representation of what happened. I lost money on the coins that I sold through Heritage, about 10% of $40K because I was rash and sold quickly. I have recovered over $3K of that through my E-Bay store which has been profitable over the first 5 months of the year. The small loss that I incurred had absolutely nothing to do with lack of knowledge as you would like the readers of this thread to believe.

My point was that if you need to liquidate coin "investments" quickly, you will be in a position where you will probably have to take a loss. If you are able to remain patient and don't need the money right away, it is very possible to wait for the right buyer for each coin to maximize your returns.

Furthermore, your point that all hobby money should be able to be flushed down the toilet is completely unrealistic. Not everyone makes the amount of money that you do which enables you to sustain your lifestyle, invest 5X the amount you spend on coins each year, and still spend thousands of dollars of completely disposable income on coins every year. And BTW, I lost far more money in stocks and real estate over the last 5 years than I did in coins. The fear mongering that seems to be associated with coins as investments is really over the top IMO.

 

Lehigh, I think you may have misinterpreted medoraman's sentence, who I believe is saying, "Unless you know what you're doing, like Paul does...". Pesky dangling modifier!

 

Oh my, maybe you are right. I thought Chris was just being evil. Sorry Chris, unless you really were being evil.:devil:

 

Maybe its stolen, and the guy wants to sell it in a hurry lol.

 

Well I am not against being evil, I was exempting you Paul.

I am talking about a normal collector, who even if they buy a decent coin at a decent price, the difference between either retail versus wholesale or commission fees is a hard gap to make up. Even if they "make money", usually its less than a decent stock or bond fund long term.

 

Agreed, I never meant for this discussion to be founded on the normal "Buy and sell" mentality of some coin "investors". I was more talking about typical value growth over the mid to long term for high value / extremely rare coins. There are quite a few coins that exhibit patterns of growth over long periods of time. However, I also agree that sometimes it's the specific coin or a coin in a specific condition that becomes more valuable over time and that we can't necessarily "guess" which coin(s) that might be. Right now, there aren't a ton of safe / high ROI investments. It's typically high risk / high reward. I think the only thing that's turning around right now is Real Estate. There is always inflation value which skews everything anyways, but coins value has typically risen for older coins. Mainly because they don't make them any more and the population inevitably will decrease over time. Therefore the few coins of a small mintage in extremely good condition are probably likely to increase in value.

I understand that every "investment" is a risk. The main reason I asked about coins as one is because rarely do you get to ENJOY your investments from a worth, history and pure joy kind of way. Hopefully that part can be understood on an even level.

 

This is a never ending topic.

In my honest opinion, "investing" has lost it's meaning. It was originally intended to be limited to an enterprise for the sole purpose of making money. It has now been expanded to anything we spend money on which might make a profit at some point.

Houses are for living in. They are not an investment unless you are in the business of building, selling or renting houses. When everyone was being sold the manure about houses being investments because inflation causes houses to rise in price over a long time, we changed our spending behavior. Everyone started putting as much as possible into their house and drove housing prices up beyond it's utility as a place to live. Then the housing bubble exploded and the investments failed. Now houses are again approaching their real value (if the government would stop propping up prices for INVESTORS) as simply a place to live. They never lost their utility for that purpose. But there are few new small houses for families just starting out like there were after WWII because speculation changed the market from utility to investment.

Now I simply say this because coin collecting is a hobby which gives the old coins some utility as a collectable. But investors have changed the market because the utility of collectables went up. In seeking to capitalize on this, they are sewing the seeds of their own failure because after investor money stops propping up the prices, they will discover that many of the collectors which give the coins their utility will have been driven out of the market.

Back to the opening remark. That 1798 Bust has far fewer collectors seeking it and far more investors seeking it. If you finally get rid of the collector with money, the bubble will burst and these excessive prices will plummet. Perhaps at that time, younger collectors will be drawn back into the hobby. Right now a game box is a far better "investment" for kids.