Coin investing, keep the flaming down!

Hiya guys, So just to play Devils advocate, I recently found this article in a U.S. News and world report, from 1988.
The Article is, "1989 Investment Guide, Special Report, Where to put your money now".
I know popular belief amongst collectors is that investing in coins is a mistake, and you would have to sit on them for a long time.
Although, I think I might disagree a bit. Not that I ever buy coins with investment in mind. But I have seen most key coins I've bought within the last 7 years have went up in price, some substantially.
There is a chart in amongst the article, and this is what it says:

 

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No flaming of Snaz allowed (LOL).

Investing in coins is not for me, but if I were to, I'd enlist a highly regarded expert in the field (Mark?). These guys could probably make you some money but I'm sure their expertise doesn't come cheap. There is an article in the October Numismatist about how Andre Dawson put together a type set this way. Really nice stuff but he sold it to get in on a business venture. In retrospect he regrets cashing in his collection.....

 

Investing in coins in my opinion is a good thing.

Coins are slow financial movers, but, it's good to convert some of your cash into hard assets like coins in my opinion.

 

I think as long as you get a good price & have the means go for it , these days who knows whats a good investment , just don't go overboard ; )

 

Coins have perhaps the slowest return of any "investment" I can think of,but as far as collectables go they retain value better than anything with the exception of classic arts.
Guy

 

Yikes! Do you have an example of such a purchase? (i.e. a coin that is now worth 10% of the original purchase).

 

Coins grow in value over time, unlike stamps which are flat to slightly sagging at the moment.
BUT
Coins as an investment don't measure up to other investments, and I feel safe in including bullion in this comment.
They don't beat inflation.

Stick with coins as a collectable, enjoy their modest gains, and relish the hunt and acquisition of new pieces.
You'll burn out your enjoyment by trying too hard to make them a portion of your retirement fund.
Experienced dealers are only ones who can regularly make a living in numismatics. Buy at wholesale; sell at retail; flip them quickly.

 

It is good advice not to put all your eggs in one basket. I'd maybe invest 30% of your funds in coins. But also do not invest in all one type or series of coins. I try to buy items I believe are "undervalued." Of course it is a matter of opinion, and may not be the same value for each person either. My collection comes first, then I try to invest in addition to what I won't part with for financial gain.

 

Coin Investing?

I had a friend that "invested" in Baseball cards and match books.
When MY house burns down I hope to find at least a big lump of silver.

I see my collection as at lease being able to "retain" value, not be something that can go up in smoke readily.

And if it increases in value because I combine knowledge with passion, all the better.

 

Any investment is a gamble with varying amounts of calculated risk. If somebody only wants to look at the bad side, then you could argue that every investment is bad and there is nowhere safe to park cash.

There are winners and losers in coins just as there have been winners and losers in the stock market. I don't believe you can claim the entire coin market is a bad investment just like you can't say the entire stock market is a bad investment. You take a gamble and pick out what you think will do well. It's all gambling.

Doug, how many $1500 Morgans did you buy during that time? How many did anyone you know buy? Did you realize at that time that those prices were crazy? Did a lot of people? From what I understand, the speculators came into the market (just like they have in every other market in the last few years, remember $4/gallon gas?? The mortgage crisis?) and jacked the prices unreasonably. It wasn't real. Collectors didn't do it.

A 1909-S VDB going from $100 to $1500, is real. How do you compare the two situations and say they're equal?

Now, to invest in coins, you would have to be willing to make purchases of stuff that was very nice that you didn't care about. Because remember, you have to sell at a profit to realize this investment. Not many people want to do that. Nobody wants to sell.
I would rather have a nice coin to look at that's holding value and can be passed down to my heirs rather than a wad of fiat currency losing value annually. Just because we're forced to use it in commerce today doesn't mean or guarantee it will have ANY value in another 100 years.

How can you blame anybody for wanting to get out of cash in any way possible? Be it coins or anything?

If you want to do a real test that everybody can do, take a $100 bill and 'stick it under the mattress' today. Then buy the nicest semi-key $100 coin you can find, preferably slabbed. Then find a strong company on the DOW and write down how many shares you can buy for $100. Wait 50 years and see what happens. What option of the 3 looks the most promising percentage wise?

In 50 years, we know the $100 bill won't be worth NEARLY as much as you can buy with it today. That's already fact. Maybe it'll be equivalent to $20. If it was stuck in a savings account at 1% interest per year it'd be worth $164.46 after 50 years. Which will be equivalent to maybe $30 by that time if we're lucky! A CD might be a little better but not much considering how ridiculous even those rates have become. Rarely enough to beat real inflation.

Now which strong company did we pick that will survive 50 years of changing market conditions and possible corruption from within? Did we win or lose? Did it beat inflation? How'd we come out after fees, capital gains taxes and income taxes?

The semi-key coin is now 50 years older. There's a much larger population of potential collectors. Still collectable? How strong is the hobby? Only time will tell.

 

I've posted this graph from the PCGS website before, but the timing of the article posted is very relevant, like Doug mentioned. In 1989 the market crashed very hard. Based on the PCGS 3000 index (which attempts to summarize the entire coin market), it hasn't even come back to 1/2 it's early 1989 peak levels. Many series like common Morgans and Classic Commemoratives probably aren't even back to 25% their previous highs.



In hindsight, it's very easy to say that people were paying crazy money. But in every up market that ends up being a bubble that burst, it's very very hard to call the top when you're in the middle of it. Like any investment, when you get into the market and when you get out is key.

But if you're a collector first, then the foregoing just really doesn't matter as much

 

Most collectibles (art, cars, antiques) are trading at the low end of their valuations. This has happened before when the economy has gone into recession. Collectible coins are no different.

At this point, it's a buyer's market for coins. Like a cheap stock market, the best time to buy is "when the blood is running in the streets". Psychologically, it's hard to do this, since many buyers fear that if they buy, the market for collectible coins may go down further.

If you're a "flipper" (short-term trader) it's far more difficult to make money in this type of market. If you're an investor (long-term outlook) your holdings will likely increase in value.

The market for collectibles generally follows the business cycle. Prices get frothy and expensive when the economy peaks and lowest after all of the sellers have been washed out and buying is dull and listless.

My neighbor who regularly attends coin shows says that much of the activity is in bullion related selling since prices are still on an upswing.

Since I don't regularly attend coin shows, does anyone else have an opinion on what's moving and not moving at these shows?

 

The paper showed that if you started investing in 1968 you would show that much of an increase. In 1968 all you would of had to do is go to the bank and buy rolls and rolls of change, It being that close to 1964 I would think that most the coins would be 90% silver. Just think of being able to buy $1000 BU Silver at face.

 

In the investment world, coins would be considered speculative at best, or an investment in a commodity. And as such, should never exceed 5-10% of one's investment portfolio (again according to the investment community). Of course, many coin collectors would disagree with this.

I personally agree with this and plan to never have more than 10% of my net worth tied up in coins or any collectible. Now whether or not I can abide by the goal is another matter.:smile

 

I agree....I have lived by this rule for decades and have never taken a beating in the market..

There's an old Wall St saying: "Bulls make money and Bears make money, but Pigs get slaughtered."

 

There are numerous articles written all the time about if you had invested in this or that, today you would be a millionair. Ever watch those TV things about investing in properties with no money down? The present housing market killed that one. Remember the Beanie Babies? A few freinds of mine USED to tell me how in about 20 years their will be worth millions. Yeah, right. Then of course there are those Hot Wheel cars. Someone I knew collected those for investing and all in the original packs since that made them worth much, much more. He moved and had to pay a lot extra for moving several thousand pounds of those things. I wonder what he ever did with them. And of course everyone invested in Baseball/Football cards. My Son used to show me price lists for those and he sure was a rich kid. Then he found he could buy them by the 5,000 unit boxes for $5. OK so those are all poor investing items. But how about that stock market? Wonder how many lost a real lot with that one recently.
No coins too could go up and/or just stay the same in value. This is a hobby and should be treated as such. Yes some make a profit with coins lately but how about tomorrow? Now for us average individuals. Add to the cost of your coins the Albums, plastic tubes, storage boxes, gel packs, coin books, gas going and coming from coin shows, coin stores. And of course the money spent on postage and insurances purchasing on line. Of course there is the home safe, home security system, bank safe deposit boxes. This means your $1,000 invested coin now hits about $2,000.
If you want a great suggestion for investing it's Buggy Whips. With the prices of gasoline today, I predict the return of the horse and buggy.

 

My coins are a hobby activity rather than a meaningful part of an investment strategy. That being said, I still want to avoid making bad purchases or getting caught up in a speculative fever which would lead me in a silly direction..