Coins and Profit

Discussion in 'Coin Chat' started by spock1k, Aug 17, 2008.

  1. spock1k

    spock1k King of Hearts

    Do coins turn a profit? Are they investments? What if someone only collects for pleasure? How long before you can make a profit on them? Do only certain coins make profit? There are many questions and not many answers. I read this great article that echoes what i feel about this topic. It might open some eyes, bring a tear to others, and some might even try to give me a black eye for this :D

    here is the link

    http://www.numisnews.tv/The-Five-Year-Hold.htm


    here is an excerpt

    Back in the Old Days of coin collecting (say 1998…) we dealers continually preached the mantra of the Five Year Hold. What the Five Year Hold said was that in order for your coin purchases to have a chance to mature financially (a euphemism, of course, for making a little dough…) you needed to hold your coins at least five years. But in the Age of the Internet, this maxim seems to have gone the way of the numismatic fixed price list ........
     
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  3. Hobo

    Hobo Squirrel Hater

    Coin collecting is profitable for dealers or they would not be in the business.

    Like the article says (item #2), the collector must overcome some hefty fees before he can dream of making a profit. And these fees are what make coin collecting profitable for dealers.

    Let's say a collector buys and sells his coins at auction. As a buyer let's assume he will pay a buyer's fee of 15%. As a seller let's assume he will pay a seller's fee of 10%. A coin would have to sell for 27.8% more than the original selling price JUST TO BREAK EVEN!

    For example:

    A collector wins the auction for $1,000. With the 15% buyer's fee his total cost is $1,150.

    The market for that coin goes up 27.8% and he sells it at auction for $1,278. After paying 10% ($128) in seller's fees he receives $1,150 for the coin. The collector has made nothing. But the auction house has made $569.50 in fees for the two auctions.

    It will be VERY hard to make a profit on your coins when their value must increase 27.8% just so you can break even.
     
  4. spock1k

    spock1k King of Hearts

    My dear hobo you definitely are not celebraly challenged :) when do we open shop?
     
  5. srkjkd

    srkjkd Book before coin

    greetings!
    i really think the only way to make money in coins is just like in stocks..buy low..sell high..if it doesn't go up, don't buy it......old quote i heard somewhere..i have done both..sometimes you get lucky..sometimes u don't. think of the people that bought the 2007 eagle reverse coins from the mint and sold them at current market..they made a lot of money..now the people currently buying them may be an entirely different story...just be happy with what you buy..if you want an investment..you may want to find something else to put your money into. even the old axim of buying real estate has fallen thru..maybe..unlesss you buy now at foreclosures..or maybe not...... no crystal ball here....guess i was no help at all!!
    best wishes to everyone,
    steve
     
  6. bqcoins

    bqcoins Olympic Figure Skating Scoring System Expert

    The last coin I sold was a beat up 1904 s barber dime, I probably shouldn't have purchased in the first place. I bought it for around $30 and a year later parted with it for $40. Was it a profit, who knows, because I turned it around into some gold. If I go and sell that gold coin, well then we'll see.
     
  7. GDJMSP

    GDJMSP Numismatist Moderator


    Ahhhh, but there's the rub - coin dealers don't collect their inventory, they turn it over as fast as they can. And that is what keeps them in business.

    People also have to keep in mind that a large part of what makes a given coin go up in value is the current popularity of that coin. Popularity increases demand, let popularity wane a bit and demand decreases, often faster than it went up.

    So even if you use the 5 year hold rule, what happens if the popularity cycle for your given coins does not match that time period ? You lose is what happens.

    And that is where people get screwed up - they think that collecting and investing are the same thing - they aren't. People collect things because they like them, people invest in things because they hope to make a profit. And it is not necessary to like something to invest in it. And if you like something, you are usually not inclined to give it up easily. And since investing requires proper timing for sale in order to make a profit, if you like it and don't want to give it up when the time comes - then you likely won't make a profit.

    So don't mix the two things up. If you collect coins do so because you like them and let the chips fall where they may.

    If you want to invest, then do so at your own risk for you will likely lose unless you are extremely knowledgeable in the field of numismatics. And even if you have a great deal of knowledge, you will still likely lose because luck and timing both have to go just right.
     
  8. CoinGal07

    CoinGal07 Still Collecting

    It's amazing if you ask a new collector 'how did you get interested in coin collecting' or 'what do you collect' the answers of course vary and even ramble at times but at the root of the majority of the answers is a hope to 'make money'.

    As a rule, GD is right - but I do know 'some' dealers who will hold certain pieces rather than turning it quickly. These are dealers who are respected for their numismatic skills and the buyers know that if it's coming out of the dealer's private collection it's definitely quality that hasn't been passed around dealer to dealer.

    Regardless, I truly think the non-dealers need to remember the intrinsic rewards from this hobby are those that cannot be measured by dollars. The enjoyment of studying coins, viewing and holding art and history in your hands, inspiring a new young numismatist, the friendship shared among fellow collectors, the thrill from winning the auction or finding the key coin or cherry picking a key date - these events enjoyed by enthusiastic coin collectors are priceless experiences.

    Coin collectors need to remember the coins in and of themselves are merely the vehicle to a rewarding hobby rather than a guarantee of fortune. If you're only in it for the money you would be wiser to invest in lottery tickets.
     
  9. Arizona Jack

    Arizona Jack The Lincoln-ator

    The #1 thing to profiting, whether it be a dealer flipping coins quickly, a partime Ebayer, or a long term investor/collector, is to

    Buy them Right !!!
     
  10. Hobo

    Hobo Squirrel Hater

    And that is the key point. If you overpay it will be very difficult, if not impossible, to ever turn a profit.
     
  11. Aberlight

    Aberlight New Member

    Exactly. I have a number of coins that I may have overpaid for them, but I spent a while looking for something particular and do not have plans to sell them. Overpaying compared to a price guide doesn't bother me when the right coin comes along. In addition I watch many others and attempt to snipe especially on holidays and these usually are always profitable, which helps to off set my expense in buying and keeping what I really want.

    Avoid impulse buys, stick with your instinct, and be willing to pay up when the right coin comes along and you will have a collection that you enjoy. As far as investing in coins...if someday when I sell the coins are profitable then great, but I will leave the investment side of my wealth to Income paying stocks and bonds. The coin market is volatile and some dealers will say if you look back far enough then they are a good investment, but then again they are trying to sell you a coin.

    Edited to add: When people buy coins at market price just to have an example with the intent on someday upgrading there is a lot of room to lose money. If you are collecting then choose wait to until the right coin comes along. I have spent 5 years and picked up 3 of 5 pattern pieces that I have always wanted. If you think coins are volatile, patterns are even more so.
     
  12. NPCoin

    NPCoin Resident Imbecile

    Most certainly they do! Yet, they will only turn as much profit as they do loss. It is very similar to stocks, in that the loss of one person is essentially the profit of another. We can oversimplify stocks to four players: seller, buyer, market maker, and broker. Out of the four players, you will usually have at least two winners, if not three, but never four! Somebody must lose in the process.

    In numismatics, you can have as little as two players. Pretty much, there must be at least one loser in the deal. If there are two players, buyer to seller, then either the seller or the buyer will lose. Whatever the buyer pays for the coin becomes the coin's baseline. So if the buyer buys the coin for $40, then $40 becomes the baseline for the cost of the coin. If the seller bought the coin for $30 then the profit/loss is +$10. So the dealer wins at +$10, and the buyer loses at $0 (baseline). Now, as time goes on, the coin will have market fluctuations that will either raise above the baseline or sink below it. Now, if after five years, the coin is marketed at only $35 and the then buyer now sells, the he loses at -$5, while the new buyer also "loses" at $0.

    A true win or lose will not be realized by the buyer until time comes to sell the coin, since the price which the buyer bought becomes the baseline for the coin's profit/loss determination. You will always have a loser.

    So what determines whether or not a coin will make a profit is the timeliness of the sell of the coin. If the owner sells when the coin is above baseline, then there is a profit, if not, there is a loss. Simple as that. There is no guarantee of any kind that any particular coin will make a profit at any time or over any "holding" period. As GD said, it's pretty much luck. Even with a vast difference in knowledge about the subject, it still all boils down to "luck", as knowledge will not affect the market one way or the other, except in very specific situations.


    Most certainly they are investments. The real question is are they a safe investment? By no means. Are they a sure investment? See above. Of course not. Any investment comes with some form of risk. Whether it is real estate, precious metals, stocks, bonds, treasury bills, etc., there is risk of complete and total loss. This is more so true with coins. Coins can be stolen, destroyed (by fire or other means), lost, confiscated, counterfeit, etc, and these are just aspects that are outside the realm of normal investment risks.



    Good for them! That means that they really enjoy what they do and it is for the most part a fulfilling endeavor that brings them peace and relaxation, as well as a sense of accomplishment in their efforts. A true collector is someone that is rarely seen today. In their case, there is no win or loss, but only what they like and the price they are willing to pay to obtain it.


    For a collector? Who cares! They're in it for the enjoyment of the hobby. For investors, dealers, speculators, market makers? It all depends on a few factors. Probably the largest factor is scruples and ethics. The scruples and ethics of the person selling will most certainly decide how fast and what issues decide their profit turn around. A seller with very little or no scruples and ethics from the pit will most certainly be able to turn a profit around on any coin within days. Market conditions matter very little when your conscience will allow you to lie, beg, steal, and cheat to make that quick profit.

    For those with scruples and a sense of any ethical value at all, however, it all depends on the market. There is no guarantee that the market will turn either way at any given time. A coin you buy today with the intent of holding on to it for a few years, may very well sell tomorrow for twice as much if the market takes a sudden twist...especially if the coin is precious metal based. It could take a few days, it could take many years.


    By no means! One of the reasons you hear of speculators talking about "sleepers" is because at some point in time, every coin will have the opportunity of making a profit provided that your baseline is not too far off from the market when it was purchased. Of course, a twenty center bought at 5x market value may never turn a profit in your lifetime. But, given a normal purchase based on market conditions at the time, and assuming normal inflation rates throughout time, any coin will be able to turn a profit.


    Yes! There are WAY many questions! But, I do not myself believe that the problem is there are so few answers so much as there are so few answers that we wish to accept and believe. Every question already has an answer. The point is whether or not we are ready to accept the answer or if we will continue on until we find the answer we were waiting for...which may never happen.


    Sorry, I didn't read it. :p




    Yet.


    WHA?! "Old Days of coin collecting" 1998????? Dennis Steinmetz was preaching that mantra back in 1978. If I'm not mistaken, Norman Stack preached this mantra well before 1968. !998 is most certainly not the "Old Days" of anything in numismatics. Interestingly, though, isn't 1998 about the time that eBay started taking off? Again, I have not yet read the article, but I see this statement as alluding to the emergence of sites such as eBay as somehow changing the market somehow, which I disagree with.

    As I said before, the time it takes to actually turn a profit very highly depends upon the sellers' scruples and ethics. With the advent of sites such as eBay, we do not see a change in the market due to the fact that coins are "more available" so much as we see that those with less scruples and ethics have more chances of furthering their practices to the unsuspecting.

    This is perhaps where GD's "knowledge" affecting profit in coins comes into play. The knowledgeable buyer is more often than not able to see through these dealers. This is one reason, also, why we see so many posts about unscrupulous sellers in the fora online.

    Anyway, chew on the cud for a bit.
     
  13. coleguy

    coleguy Coin Collector

    I for one know I will never profit from my coins in the sense of dollars. Thats simply because I can't seem to part with any coins in my collection. I have hundreds of ounces of duplicates, but no desire to part with any of them for some reason. I suppose my only profits will come in the form of satisfation and enjoyment in the hobby itself.

    Nothing against those who do make a profit from the hobby. My best friend makes a very good living doing just that, and he enjoys the hobby just as much as I do, just in different ways. I think it would extremely difficult to really enjoy collecting if every purchase and moment spent in it were mared by predicting whether or not you'll be making any profits in the future. Thats more like working and not enjoyment to me.
    Guy~
     
  14. spock1k

    spock1k King of Hearts

    Great post but the whole point of my post was to get you to read the article
     
  15. silvereagle82

    silvereagle82 World Gold Collector

    :whistle::whistle::whistle:
    I'm a collector, I'm a collector ...
    Watchin coins go by, hey, my my
    I'm a collector, I'm a collector ...
    Here comes one now !!!

    Profit ? What about preservation of purchase price? "5 year hold" ... I view this hobby just like I do my "real" financial investments --- Long Term (10+years)
    If the cash purchase value of my collection can keep up with inflation I'd be totally satisfied, because that is great compared to my other hobbies (golf, fishing, hunting, partying ... to name a few) which have netted a "zero" preservation of cash over the many years !!! :eek:hya:

    so for now ..

    :whistle::whistle::whistle:
    I'm a collector, I'm a collector ...
    Watchin coins go by, hey, my my
    I'm a collector, I'm a collector ...
    Here comes one now !!!

    PS. Spock I read the article !!
     
  16. spock1k

    spock1k King of Hearts

    lol well said. I agree for most of my hobbies except poker :D
     
  17. tight wad

    tight wad Senior Member

    RE: Profit in Coins.
    An old Scotsman once told me, "Everyman knows how to make money....not one in 10 knows how to spend it!"

    (including me, by the way)
     
  18. covert coins

    covert coins Coin Hoarder

    Nice thread Spock.. I really enjoyed it and reading everyones point of view. It is always about collecting and making money if so desire.
     
  19. spock1k

    spock1k King of Hearts

    i am the one in 10 who knows how to spend money i just dont know how to make it :D
     
  20. spock1k

    spock1k King of Hearts

    thanks. Mission accomplished :)
     
  21. CoinGal07

    CoinGal07 Still Collecting

    Tightwad.. as the song goes:

    'money don't mean nothing in this game of life.. it's just a way of keeping score. Show me a man who's got everything and I'll show you one who wants even more'.

    My goal is to leave this earth with a near zero checking account. The rest of the unclaimed cash and coins are for the first one who discovers me at room temperature.
     
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