Collecting coins is a suckers bet!!??

I've been told by a number of people on this site that as I begin my new hobby I should not expect to make any money on coins. That expecting to make money by investing in coins is a suckers bet. I respect that opinion because I have no experience in this area.

However, because of my background in investments, I did some research:

If one looks at PCGS coin indexes from 1970 to now, all categories are up well over 6% a year.

The Key date & rarities index went from 1,000 in 1970 to 27,700 in 2009 (9% a year on average).

The Generic Gold coins index went from 1,000 in 1970 to 34,833 (9.5% a year on average)

And the Mint state coins did the best going from 1,000 in 1970 to 85,000 in 2009 (12% a year on average).

That compares to the Dow Jones Indutrial index which began 1970 at 785 and is now only about 9,300 (that's about 6.5% a year).

What am I missing?

Sure, if you bought during the bubble of the 80s, you probably lost money, but other than that, coins seem to be a fairly good investment based on the facts, over the long run.

My question is, does anyone feel you CAN make money in coins OVER THE LONG RUN, and if you do, can you share a few tips as to how?

. . . or should I/we not even try.

Thanks!!

 

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I think a lot of these numbers have been propelled due to the increase in the price in silver and gold. Otherwise I have no idea

 

If you are picky and know the series you are collecting, over the long term I believe money can be made. But like anything else, you gotta know when to hold 'em and know when to fold 'em.

 

And silver and gold for all we know could continue to increase greatly. Since 1970, coins as a whole have definitely appreciated. I don't think anyone would argue that. I think the way you go about buying and the way you go about selling as well as the type and quality of the coins you purchase has a big effect on your profit/loss.

 

FYI:

Gold is up approximately 7.8% over last 36 years (from about $80 to $960)

and silver about 5.6% (from about $2 to $14.60)

 

That's what my point is, and which is why I collect more bullion than coins now.

 

Past prices are irrelevant.

For one thing, the spread between retail and wholesale, between buy and sell. Typically as a collector, you buy retail and sell wholesale.

As noted, the coins cited in those surveys are problem-free coins.

While the reports have nice, broad headers "Key Date and Rarities" and "Mint State" the fact is that the markets are more granular than that and some series are more popular than others. Demand drives the market.

Moreover, all of that is for US Type coins. Nothing is said about the broad range of other numismatic collectibles, such as ancient coins or 19th century railway stock certificates or the Machin's Mills Tokens of Vermont or a hundred others. Have you ever seen a City View Thaler?

1. http://www.coinarchives.com/1b014f15385f94c1afdb3f284f5ba3b8/img/goldberg/053/image03121.jpg
2. http://www.coinarchives.com/w/lotviewer.php?LotID=711151&AucID=514&Lot=22747
3. http://www.coinarchives.com/da646f044a387b446cba0dd7204340d4/img/baldwin/stjames11/image00493.jpg

Again for a City View Thaler, high-grade rare examples will be better investments than low-grade common examples... (Assuming that you sell retail, at a time when people have money for this, as opposed to being forced to liquidate, etc., etc.)

If you look at the phenomenal and famous auction catalogues of the greatest collectors, the prices realized run something less than the man would have earned investing more time and money in his primary business.

 

I try to buy things at face and some go up. Much better than the stock market.

 

Sure, big money can be made with coins and the key as with investments is Knowledge. Just as stocks in favor rotate, The "tone" of coin collecting rotates over the decades. Mint sets are hot for a while, low mintage,bright white, toned, variety,old gold, almost every series or type of collecting sees it's day. Buy and hold can work for some collections , but many make the money from coins by buying at the right time/price , selling at the right time/price, just like with stocks. They may even rebuy the same coin when the right time/price comes again. The knowledge needed is to know where the rotation is changing and don't fight the tape. Some do not like toning and so as the market is in "toning" , they are limiting their range. I never bought a stock that dealt with tobacco, I probably missed several financial benefits.
Second is one must know that the the coin they buy has a correct value for the coin. If a person can't tell the 16-D dime is an altered mint mark, they have little to no chance of ever recovering their cost.To make money , the vast majority of coins purchased must be problem free and correctly graded by the collector/investor.If an investor can't figure "cash flow" among other things, they may buy a bad stock

Many collectors have "toxic asset" coins from their early learning experiences that will never recoupe their initial cost, and these bring down the %gain in the long run.

A coin collector who learns to grade and authenticate their coins accurately and can judge the rotation to buy or sell will have the best chance to succeed. Fear and greed can kill in the coin market as well as in the stock market. IMO.

Jim

 

Here is where I step in with my debate. WORLD COINS. Almost all Antique/Pawn shops in America care about only 2 things in my eyes. U.S. & Bullion. I have bought Silver world coins and rare world coins for pocket change and even alot of current world coins that people do not realize are still money. Swiss 5,2,1 Franc coins for 10 cents a piece or 100 Japanese yen coins worth a dollar each for pennies. I chose world coins because they are very interesting pieces of history from all over the World and rising in value fast due to standard catalogs and the internet coming to these countries and raising their countrymen to start collecting like we did. I also chose this collecting style because it is the underdog and with alot of study in a short time you could be miles ahead in understanding Awesome under valued finds. 2 Days ago I left an antique shop with a hand full of about 5 coins for one Dollar the shop keep asked for them. I recieved an awesome Austrailian Sterling Silver Florin/ turned into a love token making it a interesting piece worth atleast four dollars in bullion alone and a Great Britain 6 Pence 1834 in VF+ condition and a Swiss 20 rappen, which to me was like handing me back 18 cents since thats its current circulation value. Anyway, I am not saying the path of collecting I chose came with out making tons of costly mistakes to start with in time and money. But it was fast enouph to learn enouph in only about a year to start producing a nice little profit and a neat coin collection.

Also some of the best advice I have gotten on coin talk is learn all that you can about what you are collecting before running out and spending all your money. Knowledge is definitly the key to this business.

 

You should really subtract the inflation difference between 70' and now to see how much just the coin went up (not the US dollar too)

 

Hey everyone! Look at my pretty bubble! ... What are you all doing with those needles? Stay back! Stay back!

 

If you're looking to make money investing in coins, you need to do the following:
1) By low (this means buying wholesale vice retail in the neighborhood of 20% back of bid).
2) Buy key dates (they will outperform inflation)
3) Sell high (this means selling at or slightly above bid)

You can find bid/ask info here: www.graysheet.com/

 

1. In many cases the price of gold and silver affect the value of the coin. In some cases the gold or silver value is worth more than the coin. Might be better off investing in bullion, its easier to liquidate it.

2. Much depends on the condition of the coin and what you paid for it. If you paid full retail it will take years to make up the difference. A dealer will offer wou much less than retail price, an auction house gets their cut.

3. The other option is to sell the coins yourself, but they are basically worthless without a buyer. One could say they are making 9% per year on a coin, but that means nothing until the coin is sold.

 

I feel you can make money, but not through "normal" collecting methods. If you pay full price for what is most desirable, whether it is toned coins or key dates, you probably have a 50/50 chance of ever recovering your original investment no matter how nice the collection turns out. The best chance you have, in my opinion, is to buy something that is selling low in relation to its intrinsic value or potential value, then holding on. For example, two areas I identified for myself back around 2003 when I got back into collecting was American Silver Eagles and modern commemorative gold coins from the 1980s. Neither were particularly popular at the time and I acquired most of the ASEs around $5-8 and the commems around $125-150. I think they were good deals then, and probably still are. This was due more to my research on silver and gold prices than numismatic value, although I continue to believe that the year the US Mint stops making ASEs, the series will almost instantly acquire significant numismatic premiums over the bullion value. They are beautiful coins that are completely taken for granted and might be melted by the millions in the next big rise in silver prices. We'll see. So the trick is to purchase items that are high quality, not widely appreciated, and that have a good chance of gaining popularity in the future. It isn't easy, but I think it's possible if you approach it with the right mindset and with enough knowledge not to get ripped off purchasing overgraded/overpriced coins. I'm sure there are things out there right now that will have significantly higher prices in the future; but it's difficult now because many high quality examples of almost everything the Mint turns out are being saved by many collectors. Most seem overpriced to me.

 

Yes but not in the way you may think.

My question is, does anyone feel you CAN make money in coins OVER THE LONG RUN, and if you do, can you share a few tips as to how?

. . . or should I/we not even try.


Yes but not in the way you may think.

I do not think you can just buy coins with little knowledge and just because they are collector coins and worth more than face value end up making much money.

It takes time and experience, patients and a lot of work.

Here it is: you must know grading, markets, trends, key dates and semi-keys. If you study say a 12-S nickel historically and see what it has done in regards to price. Determine where it is right now and if it has room for correction. If so wait till it corrects some buy it right (wholesale) if possible and find a buyer. You could make a chart of dozens of other coins like this and do the same.
This scenario is rich with knowledge that must be gained over time and cultivated with a lot of effort.
The way I have made money is finding and buying gem type stuff that I knew looked good to me and pleased other customers - people come to me for quality, real quality.
The other way I have made money is in die varieties but it is few and far between on these but many have returned my investment 1000's of times over.
I believe for the most part making money in coins is like making money mowing yards - it's a job and if you work real hard at it you will make some money - there is no free lunch.
Other than that if you buy choice, nice "rare" coins that are graded properly and original and hold them for 20 years you will make some money, probably around 10% - there is no free lunch.

There is one other thing in coin collecting that "could" happen and I have seen it happen a few times. It can and is a treasure hunt. In other words if you develop clients and work hard one day you may have a shot at a collection that has gems or die varieties in it where you are able to buy it right, (even pay the seller more than they ever would have gotten) and have the foresight or knowledge to know what you just bought or found is worth a fortune to the people you have worked to get to know and cultivate. Serendipity you might say and we (coin dealers, collectors) have the possibility of that every time we look at a group for sale.

To make a long story short, (and I'll shut up in a second) it is really our knowledge and pleasure that is the payoff in coin collecting - that always exceeds 10% even a 100% - plus that's something that we can keep and share for free with others. The payback is in living!

 

Thank you. That is the statement that will sum up this whole discussion. It is possible but most of us are more likely to follow our wants and desires than buy with a profit oriented mindset. Which is ok. I don't have a problem with that. I don't want to. My enjoyment comes from owning pieces of history and not worrying about potential profits, real or imagined.

Everything goes through phases. If something in your collection increases greatly, will you be willing to sell it at that point and realize the profit? Most will not. Most will hold and the prices will probably taper off again as something else becomes the hot new series to collect.

Bottom line: **Dealers pay wholesale.** If you intend to eventually sell out to a dealer by choice or in desperation, you will have to sell at prices that were never going to be available to you to buy at and you will lose!! Every time. This shouldn't be a surprise anymore.

Everyone needs to keep that in mind when buying from them and don't be afraid to walk away. The only way to 'potentially' even make your money back is to sell to other collectors. It's a game that I have no desire to play but I figure many things will increase in value by default, if not only for inflation. That doesn't necessarily mean you gained anything.

 

Keeping up with inflation is harder than it looks. If you can do that over a lifetime, you'll be ahead of most people. It's a worthy objective.

 

Well one thing I seem to have noticed is - some of the famous collections when initially sold bring some very high prices. The farther removed from that date the less the demand the lower the prices. It seems like some of the (a lot of them overgraded)reiver coins went for ridiculous prices initially and now they are back into reasonable(or more accurate) price ranges based off the real grades. I think some others are just like that - not saying they all are like that. I collect cause I like to and hope I never have to feed myself off them.

 

Unlike stocks, coins don't sell on an index. A stock is bought and sold as a whole based on it's price at the time of the transaction, and everyone is paying the exact same base price. Coins don't work that way. A coin may be worth say $5000 by the book, but if the highest any buyer is willing to pay is $4200, then thats the market price for the coin. Index prices and market trends don't really effect coin values as much as they do traditional investments.
GUy~