Buying extremely valuable coins... a good investment?

I like the first two Doug , But " Luck is the result of superior planning "

Pep

 

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I agree with superior planning you can put the odds more in your favor. However, luck is luck. If you "invested" in MS65 Morgans in 1989 no matter how good your planning that was a miserable investment and you had to hold those coins more than 20 years just to break even, (of course you still didn't since inflation had subsequently eroded the value of the dollar).

I am with Doug, no matter how smart you are, how much you know, how well you plan, luck will always be a part of it. Only those who have only had good luck will contest this fact I believe, ascribing to their performance superior intellect, and ignoring luck. Myself, I know I am lucky buying silver at $4 and ancient Chinese coins 15 years ago. I wish I could say I was that smart, but luck had something to do with it as well.

 

Investing is just great at the right price :yes:, its the same old saying buy low sell high if thats what your into, me I'am just a collector & proud of it ,some folks will always try to make a buck even on pork bellies :dead-horse:

 

This is a hobby for most folks but yes other folks are in it just for the money and sometimes it back fires on them. I'm in it for my own pleasure but at time I sell some of my beauties and always regret selling them no matter how much money I make off of them as I know how hard it can be to replace, the really nice ones. As far as if it's a good investment goes, it all depends on if you can purchase a RARE coin at a good price. And I must add, the coin MUST be a very eye appealing as this is the BIG factor in selling for a profit.....Joe

 

I'm not sure how far to read into this statement. Are you saying people who have limited means should buy coins expecting to make a return if the time arises? Thats a very absurd and dangerous proclamation. I think if you don't have the budget to throw into a hobby with the attitude that that money is gone, you don't need to be buying into it in the first place. That would be like encouraging a fry cook at McDonalds to go ahead and buy that $800,000 home on his $15,000 salary because in five years he'll be able to sell at $1.2 million.

Maybe thats not what you meant, but thats how it came across.
Guy

 

I think he misread my comments, but I could have been to blame.

Listen, quite a few things are going on. One is some collectors morph into psuedo dealers, buying coins for a price not strictly for the love of collecting. I believe a lot of those who strongly object to my position on "investing" in coins are in this camp. If you are very knowledgable, and buy for resale possibility more than to hold forever, you really are more a dealer, and as such my advice does not apply. I am talking about collectors, who have the bad habit of falling in "love" with coins and "needing" them regardless of price.

I am simply saying if you are a collector, the buy/sell spread is huge, coins can be fairly illiquid, and most of the time you are better off investing in "investments" rather than coins. I know many collectors who collect GOOD coins, are knowledable, and are lucky to break even over 20-30 years of collecting. In the same period most other investments have gone up 5 fold or more. Dealers have to make money, and they do so buy collectors paying more than dealers will buy for. Simply economics.

I simply caution against coins as investments since it is pitched so often on higher priced coins by dealers. They do it to me, if I pick up a coin worth over $1000 they start talking investment returns, etc. This is a hobby. Spend money on a hobby you don't NEED, and invest in better types of investments. That is my position, and if it upsets anyone then I am sorry. I am simply seen too many trends of ups and downs, and too many people investing life savings buying overpriced goods they will never see their money back on. I would hate to see even one person have this happen to them if I ever advocated collectible coins as good retirement plans.

Chris

P.S. Now frame this discussion differently, and discuss the advantages of coin collecting versus most other hobbies, and I will be the first to say we have a huge advantage in that we do have a high residual value if we ever need to sell versus most other hobbies. I love the fact coin collecting is much better this way than boating, car racing, drinking, mountain climbing, etc. We do have a financial advantage over those hobbies, I simply do not feel we have an advantage over true investments with tiny little investment fees associated with them. Can you get lucky with a coin and outperform a good bond? Heck yeah, but I challenge a normal collector to ever think his entire collection can do so.

 

Marshall,

I appreciate and respect your input, however there's something about it that rubs me the wrong way. I don't know whether it's because I disagree with you or that you state it very "matter of fact" (I'm not usually a fan of absolute statements). I respect your opinion on the term investment, etc... however;

Definition of investment: "the investing of money or capital in order to gain profitable returns, as interest, income, or appreciation in value."

It includes "appreciation in value" so I'm not sure where it lost its meaning. Buying a house is an investment vs. renting a house because of the equity involved. You are paying a mortgage so that your money is going towards something you can have a return in, in the future. If a house was purely for living in, everyone should just be renting. Same goes with buying a car, etc... etc... To me, it is very similar with a coin collector vs. a coin dealer. The dealer typically is buying / selling coins purely for profit / sustainability. The collector might buy a coin to enjoy in the short term, but hope that over time it will increase in value if they ever want or have to sell the coin. Similarly to how someone might want to move to a different house and they sell their current one.

I'm not sure who you have a grudge against, but my perception of your statement(s) is that it is almost a personal attack. I don't know if that was your intent, that is just how I am internalizing it. I don't believe anyone is "propping up the prices", I'm fairly certain that prices are set by supply and demand. Additionally, if you were trying to sell something (regardless of whether it is a coin) wouldn't you want to maximize the potential for profit? Why would someone sell a coin for $100 when they could just as easily sell it for $1000? If someone is willing to buy it for that price, then the prices are going to continue to be in that zone. I don't see coin prices come down until either a) demand goes down - or b) the supply goes up (Thinking about coin hoards, etc...).

Again, I respect your views I just wish I knew your perspective so I could better put myself in your shoes / view.

Doug... WOW! This has to be the most on-point and informative posts I've seen on CoinTalk. I appreciate your experience and input on the subject and I completely agree with your statements. Of course there are things that are unexpected, etc... that make it hard to invest in anything really. You never know if a stock is going to crash, your going to get robbed, etc... Those are things you can't really plan for and can't really be focused on when thinking about investments in general. I wasn't talking about putting all my eggs in one basket, and hopefully would be able to right for the best time for roi. I feel that might be more about preparation with other assets so that I wouldn't be forced to sell, etc... when it is a bad time. Again, of course you can't plan for everything and there is an element of luck involved. Overall, however would you say that coin values for rare / good condition coins go up over time? If it is the case, I don't think I would be afraid to try investing a small percentage in high value coins in hope that in the long term it would appreciate in value. I understand that coins are not liquid investments and it could be more complicated / more work in order to even try to get that higher return. To me that's all part of it. The market for coin collectables is relatively small and it all takes more time / effort in general to try and find the "right coin". I imagine it would be the same if you wanted to sell that coin.

I'm also not really talking about going out and finding a coin purely for the fact that it is going to increase in value. In the same way that you wouldn't purely by a house because you think it will increase in value. It would need to be a house / coin that you can enjoy and fits the specifications that you want in that asset. I use the word asset on purpose because in reality, coins are assets. They hold considerable value whether we like it or not. Because of that, is why I brought up the subject of investments. It is more comforting to me, to know that money that I spend on coins is not just going into "maintenance" (thinking about fixing a boat or a car, etc... where the money doesn't add to the value typically). However, if your adding coins and or time to your collection the value will typically increase which could make it easier if you ever decided that you didn't want the coin(s) anymore.

Again, I really appreciate everyone's input. I apologize for this long-winded overly worded reply

 

I see your point, however are you talking about coins in general or the extremely rare / valuable ones that are in high demand? It is a general question as I don't have a list of such coins. But I'm guessing if you have the right coin(s) that are always in demand, you might be able to overcome a drop in overall market value. I could possibly be wrong, but the only way to be sure is if we had record of any and all extremely rare / valuable coins vs inflation over the last 25-50 years. Like you said in your other post, a lot of it would be luck in choosing the "right" coin(s) to try and acquire that you would think might overcome any adverse market fluctuations.

So to answer your question, based on your premise no I would not consider coins a "good" investment. However, I'm sure there are worse and more volatile things someone could invest in. Though it's good to get information now as I'm still in the age of "High Risk / High Reward" investment status as recommended by most financial institutions. IE: The older you get, the safer you want the investments to be.

Edit - Again, this is me not liking absolute statements so I feel the need to address this one (please don't take offense). Not "everything" goes up in value over time. Things depreciate in value all the time. I understand your original idea, that the general cost of things goes up over time. IE: It costs more to buy a car in 2012 than it did in 1990. However, if you bought a non-collectable / common car in 1990 it's going to be worth less now that it was when you bought it. Yet, if you kept that car in great condition with little to no mileage (uncirculated) it would probably become a "classic" at some point in the future (possibly 20-30 more years) and it could increase in value to more than the initial purchase price. Not the exact same situation of course but the premise could still be attributed to coins, as it could with most things.

 

Doug,

Ultimately I agree with you that buying coins is not really a good or smart investment. However I liked your previous statement in that it takes a lot of luck but could potentially possible to get a decent return if you acquired the "right" coin(s).

 

Understood,

Thank you again for your thoughtful and informative post. I guess I'll just stick to enjoying coins for what they are and be comfortable knowing that they'll always at least be worth "something"

 

No, the absurdity is that if you buy coins you should do so with the assumption that the money is gone or flushed down the toilet. I have never taken a 100% loss on any coin I have ever owned, EVER! I never said someone should expect a profit, but to expect to get 60-70% of your purchase price at sale time is relatively easy to do especially if you are a knowledgeable collector. Based on your (& Chris') rule for collecting, a great many members of this forum would never be able to purchase a coin.

For the record, I don't even know how you took the leap from my statement to the crazy McDonalds analogy.

 

Life in general, with the high and low points are what some call luck. Pure luck like a lottery is a numbers game , very long odds.
Do you remember the Old Peter Sellers movie , " Being There " ? If you have not seen it you are in for a treat !
Pep

 

BUt its not presented that way sir. Many times collectors are cajoled into buying what they desire by "its a good long term investment" statement to get them to overcome their reservations. It is this that I object to. Collectors overpaying what they can afford for a hobby by the claims of them being a good investment. Therefor, people investing retirement funds into coins they otherwise cannot afford.

I am not any different. I would LOVE to own a nice F Ameri. cent, or a nice VF Julius Caesar portrait, a gold Sassanid coin, or many other "goodies". I am just not about to sell some stocks, bonds, or land to be able to put more money into a hobby. If anyone is doing that and is not a dealer, I would be nervous.

That's all.

 

So are you saying this is good for investing? A return of 60-70%? Even the poorest of mid grade stocks perform far above that. I never suggested anyone loses 100% on a coin. Thats not even possible. But if we're talking investing in them, as we are, a 60-70% return is quite horrible, on any investment.
Guy

 

I never said coins were a good investment, I simply disagreed with the premise that "hobby money" should be considered flushed down the toilet. And the 60-70% return I gave is an extraordinarily conservative number. Personally, I am breaking even with the sale of my collection. And regarding the relative risks involved with investments, I submit that other types of investments are just as risky as coins. Want some anecdotal evidence, the value of my house has dropped over 40% since I bought it, and I am not alone in that regard.

 

Ok, my appologies, Paul. As a hobby, yes, coins are better than most, with the exception of fine art, for keeping a lot of their value. I mean, you go buy a boat and the value is instantly gone.

I suppose what I was getting at is if a person is looking to invest in the hobby itself, then thats one thing. Thats never a waste, even if the money is forever gone. But for a young person to see exagerated hype on tv and newspapers about rising gold and silver prices and equating that to coins being a great investment, then I still stand by my remark they are throwing money away. If a collector has, at the end of his life, or end of his collecting, sold their collection and received more than half their monetary investment back after many years of enjoyment, then thats an added bonus.

I think we agree with each other but were misreading each other.
Guy

 

"I appreciate and respect your input, however there's something about it that rubs me the wrong way. I don't know whether it's because I disagree with you or that you state it very "matter of fact" (I'm not usually a fan of absolute statements). I respect your opinion on the term investment, etc... however;

Definition of investment: "the investing of money or capital in order to gain profitable returns, as interest, income, or appreciation in value."

It includes "appreciation in value" so I'm not sure where it lost its meaning. Buying a house is an investment vs. renting a house because of the equity involved. You are paying a mortgage so that your money is going towards something you can have a return in, in the future. If a house was purely for living in, everyone should just be renting. Same goes with buying a car, etc... etc... To me, it is very similar with a coin collector vs. a coin dealer. The dealer typically is buying / selling coins purely for profit / sustainability. The collector might buy a coin to enjoy in the short term, but hope that over time it will increase in value if they ever want or have to sell the coin. Similarly to how someone might want to move to a different house and they sell their current one.

I'm not sure who you have a grudge against, but my perception of your statement(s) is that it is almost a personal attack. I don't know if that was your intent, that is just how I am internalizing it. I don't believe anyone is "propping up the prices", I'm fairly certain that prices are set by supply and demand. Additionally, if you were trying to sell something (regardless of whether it is a coin) wouldn't you want to maximize the potential for profit? Why would someone sell a coin for $100 when they could just as easily sell it for $1000? If someone is willing to buy it for that price, then the prices are going to continue to be in that zone. I don't see coin prices come down until either a) demand goes down - or b) the supply goes up (Thinking about coin hoards, etc...).

Again, I respect your views I just wish I knew your perspective so I could better put myself in your shoes / view."

I think the problem can be boiled down to INTENT. An investment is made with the intent to make a profitable return. A house can be a product to the builder and HE is a productive investor.

The purchaser, in most cases, intends to USE the house for shelter. In that role, it has a value based on utility. It provides shelter without regard to price.

When the value of this utility rises, new investors (not builders or renovators) begin to drive the price above it's utility value and create a bubble. Bubbles happen when the supply of non productive investors money exceed the supply of product available at or near it's utility value. This changes pricing because of non productive investor demand as opposed for demand for it's utility to provide shelter.

The problem is that non productive investors are encouraged while the bubble expands because all parties appear to be benefiting. But all bubbles eventually end and all are hurt. Bubbles cause irrational behavior and distort the market signals. Expecting bubbles to last indefinitely makes one a politician and a fool. I used to think only some politicians were fools, but I've changed my mind.

Back to coins. TPGs have made investing in coins appear to a safer investment than they actually are. They serve a limited purpose, not an unlimited one. It has introduced an artificial demand for coins and particularly high end coins. But when investors look to other investors to make a profit, you've introduced a Ponzie scheme where the last investor holds the empty bag (or plastic).

Now I hope this clears it up. But sometimes my efforts just turn into a slightly varied version of my original statements with the same strengths and weaknesses.