I started my investing career with precious metals and bought a big load of gold and silver bullion. I then read that during the high inflation in the 70s and 80s, rare coins significantly outperformed bullion. So, I decided to switch to collecting and investing in rare coins, specifically Morgans. Interested in knowing what you all think about this. Is anyone else on here investing in rare coins?
Coins are generally a terrible investment unless you are very familiar with the markets. Experienced collectors and those in the business can make money in the long run, but you are unlikely to get good returns unless you know what you are doing.
I have yet to read a single post on CT that recommends rare coins as an investment. But maybe I just missed 'em.
And I think often those people who DO end up with a good return on their rare coin investment get it because of good or lucky timing. One example I like to use are the GSA CC dollars. If you chose to buy them in say 1997 and sold them in 2001 you made out like a bandit!, If you bought them from the GSA sale in 1972 and sold them in 2001 you did so-so. If you bought them in 72 and sold in 97 you had a modest loss in real terms. If you bought them in the GSA sale and you are still holding them your showing a significant loss in return on investment. Why is this? Because they were pretty much flat from 72 to 97, they tripled between 97 and 2001, and they've been pretty much flat since then. Those long flat periods hurt badly because during those times your investment is not keeping up with inflation and you are losing money in real terms. Buying and holding has been a losing proposition. If you can buy right before the price jumps and then sell afterward you come out smelling like a rose. But there is no way to predict when a major jump in the market will occur. Guess wrong and you lose.
Coins are a horrible investment in general. The quicker you disabuse yourself of the idea the quicker you will enjoy this hobby.
One of the primary reasons people do poorly "investing" in rare coins is the premium you pay and discount you incur when buying and selling. Lets take an average Joe or Jane. They go to the LCS or show and buy a "pretty" coin. They basically pay retail. Lets say 10 years later they decide to sell. They sell to the same person they bought from. That seller will offer them at best around 80% of the retail price. That 20% discount basically negated most of any profit. This is for the most part a BEST CASE scenario. Frequently a buyer disagrees with a grade of the coin, offers lower percentage of retail, Joe or Jane maybe bought a problem coin so will sell for less, etc etc. Yes, rare coins in magazines can show good returns, and it appears to be a nice financial alternative. But, real life and profits dealers need to make get in the way of this theoretical return. IF you are a dealer, and can sell your coin at full retail, and maybe buy at less than retail, you can make money "investing" in coins. If you are not, I will STRONGLY ADVISE to never "invest" in coins. It is a persuasive argument. I would love to sleep at night thinking the money I waste on coins are all good financial investments. I would love to convince myself I should buy a $1000 coin I covet for my family's "financial security". I would love to do so, but I would be lying to myself. Its such a wonderful thought that this is why its repeated by coin salesmen so often. They wish to make a sale, and if they can lie to you and convince you its an "investment" you might be more inclined to buy. Please do not fall into this admittedly attractive trap.
