perils of coin collecting

If you're looking to invest, you may want to look at something other than coins. There is just way too much competition and it's really difficult to make money off this hobby. If you like coins because you like to learn about them and the artwork interests you, then that's good continue collecting. Incidentally every question you posted has been asked at one time or another. You can use the search option and get some answers. Welcome back.

 

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Investing isn''t a bad thing. I am one and it is all about survival in this market. If coins aren't cutting it for you, then stocks/currencies/futures are the way to go. I think what you should do is invest some money in some rare key date coins(slabbed of course) and sit on them for 10 years.. The S VDB or the 1916 D Merc dime are easy to liquidate when the time comes..

 

I would like to see these numbers adjusted for inflation...that would show the real picture and how bad it REALLY is. lol

 

Adjusted for inflation, assuming a average of 3% inflation per year as per the CPI. (the 1987-2009 figure is what it would have to be to just have broken even due to inflation.)

coin...........1987.......2009.......1987-2009 @3% growth
Iowa..........$375.......$100.......$677
Oregon.......$675.......$265.......$1219
61 PF set.....$17........$13.........$30
81-S 1$.......$150......$47.........$270
22-P 1$.......$170......$37.........$307
1885 $ roll...$500......$580........$903
52 mint set..$220......$660........$397
PF Barb 1/2..$4400....$3200......$7946
2 1/2 Ind.....$5300....$2920......$9572

 

Thanks Conder!

 

That's amazing...the only winner was the '52 mint set. Anyone thinking about investing in coins really needs to read this thread.

 

I think you are viewing coin collecting as an index. I don't think this is a good strategy. Consider a number of factors:

1. Your purchasing power- I assume you are buying in U.S. dollars. In the early 80's I was living abroad. The dollar almost bought 4 Deutsche Marks. Because of the strong dollar it was common to be able to purchase 1948 5 pesos silver coins for under $3.00 in Europe. At the time, I was thinking about doing something with cash. I started collecting pre 1950 Spanish/ Mexican silver coins.I bought about 1500 silver coins.In hindsight it might seem brilliant, but at the time, the U.S. had come through what I think was probably the most disruptive time in U.S. economic history. Life changed when oil quadrupled in a year. The market was dead. You could get 14% on your money from the bank. Who would be buying coins nobody wanted?

We are living in different times- today.

2. The U.S. Economy- Most people in the U.S. have probably lost 14-25% of their assets in 1 year. I personally don't know anyone who is better off now than they were in 2005. I think more people are selling coins today than in 2005. I consider this the start of a buyers market. The coin market will probably become softer. If you got cash, this might be the time to keep your eyes out for value. I think it's more of an issue of buying only rare, low issue, popular coins.

3. Pick your own winner- I personally buy, sell, and trade 1932 D/S Washington quarters. I know this market well, consider it my specialty. I've learned how to grade it well, know the market--what times of year to buy and sell, can scope it (yeah I carry a scope with me), so I can see problems. I can buy them in the Mid-west and sell them in California. I know the general consensus for the sheets/guides, but I don't depend on any generalizations. I definitely don't need to carry any of them around. It's just my own pulse. (It's also softening)

4. Do you like coins? First and foremost-- you should like coins and collecting. Because if you don't there are probably better things to do with your time and money.

 

Coin Collecting and Investing

There are sensible compromises for those who want to collect US coins and probably make profits in the meantime. Large, popular gold coins, good for grade, in the $1500-$2500 area are low risk options. I would recommend going to coin shows for making substantial purchases.

I received the Rosen Numismatic Advisory recently, his "Crystal Ball" report, with some major players in the field and their recommendations, I would recommend it for those who want to hold coins for the long term.

I think we are comparing apples with oranges with the market highs of the 1980's. Those coins were hard to find in the certified holders, there were some investment firms at the time who were experimenting with an aggressive investment model which is hard to compare with a much smarter group of coin dealers and collectors in 2009.

 

If want a hobby, collect coins.

If you want an investment, collect miniature trains. My trains have appreciated much more than my coins.

Oh, and they both are expensive.

Happy HoHoHo.

 

Good to hear that you are back to coin collecting...

 

Not sure that example tells the full story though. Sure, if anyone is thinking of investing in common, easy to find average coins that aren't very special, then yeah, that is some good information to keep in mind as those coins have suffered major losses since the mid-80s. But in the same time period, if you would have purchased in high grade/top pop coins and purchased key-dates the story would not be the same.

 

Praxeology is the Science of Human Action

Well, we get these investment topics often enough. The advice and opinions tend to run in known channels with a lot of turbulence from individuals.

Basically, the stock market is regulated both at the exchange level and, of course, legally several ways at the federal level (SEC, FTC, etc.). Numismatics is totally open. In the stock market, anomalies are opportunities, but in numismatics, it is all anomaly. In the stock market, the average person can invest randomly and broadly and hold it for decades know that the market will carry them upward. Numismatics is not like that.

In numismatics, you have to TRADE to profit. Buy and hold only seems to work for selected events viewed retrospectively.

(In fact, I would argue that even for stocks, buying and selling is important. Over years and decades, you have to prune the portfolio. But fundamentally, the generalization stands.)

Historically, if you want a model for numismatics, consider the spice trade. As profitable as nutmeg and cinnamon were, they were not buy and hold commodities. Today, you can buy a shipload of nutmeg at any Cosco.

Look at any coin price tables from 30 or 20 years ago and the winners of the moment were the fads of the moment. Fads change. Rainbow toned or blast white?

We do have "blue chips" in the keys that many collectors pursue. The 1932 Quarters mentioned are an example. 3% inflation would turn a coin selling for $22.50 in uncirculated grade in 1973 into a mere $65 item. Note that the 1973 Red Book price is for ONE grade of "uncirculated." The current Professional Edition prices the 1932-P at $25. Not very exciting. However, the prices at MS-65, 66 and 67 are more interesting, but those grades were not factors 35 years ago. PCGS and NGS were not around. The advantages in these markets are always about change.

A generation ago, with collectors coming into the markets, the demand for Uncirculated coins from previous years made "uncirculated rolls" a hot item. But an roll of Uncirculated 1937-D Lincoln Cents is not the same thing as a roll of 1997-D Lincoln Cents and another 60 years won't help.

Basically, you have to buy and sell if you want to make a profit and as with houses or cars or nutmeg, the profit is not in the selling, it is in the buying.

 

Don't count on that. This is the PCGS 3000 index of key dates. Now it only deals with PCGS slabbed coins so I would ignore the data from before 1986because there was no PCGS before then so you really can't compare that raw coin data to the PCGS slabbed data. You can see there was a big spike in the first couple of years due to rampant speculation, but overall the key date return has remained flat which means that after allowing for inflation you would be looking at a loss in real terms.

 

It's my understanding that the PCGS 3000 does include key dates, but it also includes common date type coins as well in an attempt to track the overall coin market. Alternatively, PCGS also has a Key Date and Rarity index which over the same time period shows a different picture, which is somewhat what I based my earlier comments on:



In any event, just jumping in and speculating on coins w/o knowing what your doing, as with any "investment," can be a recepie for disaster. On the other hand, if you do know what you're doing and are able to buy the right things at the right time for the right price, I think you can also do quite well.

 

You are right, I was looking at the wrong chart. That chart does show a better than inflation growth rate from 86 to date, a little over 7%.

 

i like what you said about buy the coin not the holder but I started collecting coins when I was about eight now i have just recently got back into it it and found that after about twenty years the coins in the whitman folders are getting green little corrosion on the edges. VERY BAD NEWS! I am going to take them out but how do I know if the 2x2 coin flips are mylar or vinyl ? and what about the clear 2x2 Lead Dog Brand pages I have to hold them in I don't want to make another mistake for my long term collection of a LOT of coins and now wood to worry about to. starting to get a little confused, frustrated and scared at the same time. Thanks to all who help...

 

Still you appear to be the one missing the point of this being a hobby, not a real big investment thing. Ever hear about people that build model airplanes for flying? Many of them crash. Hundreds and sometimes thousands go BANG. Guess they shouldn't have gotten into that hobby. Ever hear about someone that restores old cars and takes it out for a spin and gets into a CRASH. Guess they too shouldn't have ever started that hobby. Friend of mine, electronics super star, built his own computer. Took a few months and when done found one ten times better at a grocery store. Dumb hobby, HUH?
If your looking for a hobby that is an investment, try Beanie Babies. OOOPPPS. That one didn't make to much money for collectors either.
All I'm saying is forget making money on any hobby. They are for FUN.

 

Lackluster, you're picking a time in 1987 when there was a bubble forming in the investment coin market. Then everything crashed around 1989. This was a phenomenon perhaps similar to the gold peak of 1980. Also, stocks go through peaks, troughs, and crashes. How did your stock portfolio do over the past 18 months? Over the past decade? A lot depends on your entry and exit points.

Here's what I would do (and I do this as best as I can for myself):

1) Collect coins you enjoy, first and foremost. The coins which interest you most are ones that you'll study and learn about.

2) Collect quality. Slabbed coins (PCGS, NGC, ANACS, in that order) give you some assurance that you won't get stuck with a counterfeit or grossly over-graded coin. You can always crack them out if you don't want the slab. Until you become confident in grading yourself, slabs do offer an important protection. And true, coins having the same technical grade can look very different, so get the better quality, even if you have to pay a modest premium. Quality goes a long way, and there are no real bargains anywhere.

3) Have a focus to your collection. There are many ways to collect, ie, type sets, date sets, mintmarks, varieties, etc. Think of a way to organize your collection and keep to that focus, even if it's a few different sets. At least you'll have sets and not just an accumulation.

4) If you think something is outrageously priced, don't buy it.

5) Pay attention to coin cycle trends. Read Coin World and Numismatic News and follow the buzz of the market. Then you'll need to assess for yourself what's reasonable and what isn't. But aside from these cycles, key date coins are always a best bet, so that's another way to play it.

6) Generally, it's best to have a long term approach to coins, more than 10 years. But there will be opportunities for shorter term profit: manias in certain series are a good time to sell, while a good time to buy is when no one wants coins. Also, there are niches of the market where you can get historical higher grade coins for modest prices; an example of that is the Bust Half series.

7) Never stop learning about your coins. Buy the book before the coin.

Those are just a few random thoughts of my own. I have found that buying quality coins with nice eye appeal always gives me an edge when selling. The common date typical coins always do the worst.

Good luck and have fun.

Steve

 

I have to agree. There is a lot of risk in numismatic investments. Certainly, potential to make a good buck exists but there are better places to invest your money if your not in it mostly for the hobby aspect. To me collecting is a passion. It brings me joy and is a part of who I am. I find that in most cases the pieces I like I also feel may yield a nice return in the future but I understand that there is no guarantee. So I only buy things that I absolutely love (I make sure that I love them to the point that I don't foresee having a desire to sell them.) This way if they fall in value I still enjoy being their caretaker.

Investing is a job and it requires a constant study of the market. If you are not willing to put the time into monitoring and analyzing the market then you are not willing to be an investor... and you should expect financial losses. The idea of buying something and expecting that it must go only up in value over any period of time is foolish (i.e. the mentality of most homeowners pre 2008)