Coins as Investment: Good Idea or Bad?

I know, this topic has come up many times before, but mostly in old threads. I think it needs revisited now that we're far from 2008/09', the economy is relatively 'stable', and there are a lot of people naively considering coins for investment purposes and have only the old threads to go by.

First off, it's easy to fall in love with coins. The history, the art, the stories behind them, the detail, relief, luster . . . yeah, I love coins.

However, for investment purposes, I see the main hiccup with numismatic investment is its ILLIQUIDITY. That, for me, is the biggest drawback. I can't go anywhere and cash them in for top value at a moment's notice. Coins, especially ungraded coins, which I focus on, can take years to move for the right price. Dealers, of course, can move them much faster, and in higher volume. But that takes a platform, contacts, brains, experience, and shrewd timing - someone new to coins will not have and will not earn in a short time.

Coins indeed can be a confusing hybrid of bullion investment and numismatic potential. But when you go to sell, both the bullion content, and numismatic figures, often fall short of what you'd hoped.

It's easy to love coins and buy a lot and justify the expense as investment. However, if you set the bullion value aside, and focus strictly on the numismatic premium, it is no different than dated gov't issued stamps. It is a collectible. And cashing in on that collector value requires collectors willing to take it at the value you think it has. I don't see it as a collectible like Care Bears or Star Wars figures, which are faddish [though the Morgan boom seems a little faddish], there does seem a slow but steady climb in value through time that probably outpaces inflation - but I think it takes generations for real value to accrue. Certainly not short term, unless you're flipping them, which is more of a small business than retirement investment.

I could say more on this topic, but just wanted to open up a thread and see if I can draw some of the experts and their wisdom in, for those looking to seriously invest in numismatic coins with expectations of wild gains within their lifetime.

 

Log in or Sign up to hide this ad.

I think you just spelled out a lot of good reasons why numismatic coins aren't an investment.

 

Investment? Bad idea for most of us. Besides, it takes all the fun out of collecting.

 

Investing in numismatic coins takes more time and knowledge than I'll ever have. I do invest in bullion coins, but I buy numismatic items purely for fun, history, aesthetics, etc. Though, admittedly, I do bargain and haggle with dealers and I also won't overpay for something that I really want. So the investment angle always lurks somewhere behind every purchase. But wild gains? That seems like a long shot.

 

I think the only coins that are a good investment are the million dollar coins.
1913 Liberty nickel, copper 1943 Lincoln (not a million) etc. Because you enjoy these types of coins for a few years and when they go up for auction again,
the price is usually much higher.
But for the other 99.999999% of us it's never going to be an investment.

 

I like ungraded coins because there's a bit of an unknown there, and I like the spread - I think it can beat the slabs . . . if it's the right series, year, condition, and the demand is strong. However, moving the ungraded coins for the price I think they can earn, is a lot of work. It took me a full month and 3 different listings to move the 93' VF Morgan I had for $200. It is almost a career it's so much work. And I think those coming naively in to numismatics don't fully realize how much work it will be down the road to cash in on their 'investment'. And that's assuming the economy is stable enough to provide the necessary discretionary income to drive collection.

I came in thinking I could hedge my bets, have coins with both strong bullion and great numismatic potential. If the economy tanks, my bullion booms. If the economy does well, my premiums rise. I've come to the conclusion it's just not that simple, have moved far more towards bullion, especially dated appealing unique bullion [bought close to spot], and have tried to manage my love for coins as more of a leisure activity, that will bring great pleasure the rest of my life, but is not an investment per se. Besides, I look at premiums now on my old 5 oz Engelhard bars, and I'm like WOW, bullion can certainly grow its own premiums too!

Silver and the dollar I guess will always remain at war. For the dollar to stay strong, silver must be suppressed. For silver to rise, the dollar has to be in trouble. Which is so ironic considering how strong the movement in the U.S. was, turn of the 20th century, for a silver-backed dollar. Then silver owners wouldn't have found themselves in such a predicament.

 

I am not a collector as to speak, I collect whatever as an investment for my kids/grandkids. I lean toward proof sets and gold coins. I buy from the US Mint to insure of not getting ripped off by the TV scammers such as the coin vault. Don't know a lot about the coin world but do trust the US Mint to not send me garbage. My kids will never know what I paid for any one item but will be 100% profit for them. Just something I want to do for them.

 

@rrholdout

Liquidity is never the problem. The problem almost always is that the seller wants more than an amount most people are unwilling to pay.

I guarantee you that I could sell my entire collection within a matter of days if I was willing to accept reasonable offers.

Chris

 

Don't kid yourself! The Mint overcharges for their products, too.

Chris

 

I buy mutual funds for investment, stocks for a bit of educated speculation and coins purely for enjoyment. Like others, I prefer unslabbed coins though I agree that moving them later is more of a challenge. Sadly, unless my kids pick-up the hobby I will have to value and sell the coins prior to my demise to make sure a fair price is received. I have tried my best to raise interest with the stories of the coins I collect, though so far it's fallen on deaf ears.

That said, I will continue to do what I enjoy and collect what I can afford. There is something to holding a piece of history and preserving it for the future that I will enjoy whether or not I receive any financial gain from it.

My advice would be to only buy the best of the best if you're investing and make sure it's not a manufactured rarity due to there just not being many submissions due to the cost/reward factor. If you get the absolute best 1877 Indian Head cent available, chances are if it's certified, you will get your money back and then some in a few years. Buy the highest grade 1972 Eisenhower and you're on your own there...

 

@Who don't overcharge ? but at least you know you are not buying garbage from some TV clown.

 

Couldn't agree more! My Father's estate included proof sets from the 1970's...look them up on ebay...I think inflation has far outpaced them as an investment even straight from the Mint.

 

See your point Chris.

Yes, I could auction my entire collection on Ebay starting at 99 cents and it would all be sold at the end of the week [provided there is Ebay, or similar site]. But wise investment is always buy low, sell high - I would never price something unreasonably high as it would do me no good. I always do the market research to make sure what I have will sell and has sold for x amount of dollars. And undercut it. I want a high STR - 100% if possible, though sometimes the market is off for a certain coin. However replicating past sales can take a lot of time and patience . . . finding your buyer. It's like selling land. Great patience is required. And coins are like little properties, that you want to find the right buyer for, for the right price.

So yes, 'illiquidity' may be the wrong term. Rural unimproved land can be very 'illiquid'. The demand is strong for coins, people will buy them. But not necessarily for fair market value. It's a patience game.

 

Coins are a lot like cars. Once they leave the mint, their value starts to decline, and continues to decline until it is destroyed. If you can hold on to it and protect it from damage while others are being destroyed, it will eventually become desirable as a collectible and begin to gain value. The more expensive they were new, generally will tell you how desirable they will be in the future.

 

I bought a proof set in 1988. Not an investment, just for fun. I think I paid $8. I have the original packaging, and the quarter has toned. The S is a bit broken/ missing from the dime. Value today, 30 years later $8. My former LCS offered me $5 a number of years ago (which was fair) and I declined. Here is my question.
If you look up each individual proof coin, the total value is in the $20 range. So why is the set worth less than the sum of it's parts?

 

I've also found that poorly conditioned coins, even mid grades, tend to underperform in the marketplace. However AU and above often exceed my expectations. It makes sense. Collectors want a fully detailed coin that is complete, even if toned and scratched. Selling a poorly conditioned coin is like selling a Frisbee with a bite out of it.

 

Bad idea imo. Unless you're talking really rare really expensive coins that would generate auction buzz, etc. But for the average collector I think looking at your coins as an investment is a bad idea as it's very likely you'll be losing money on most coins when selling. Sometimes you can get lucky and make money but most times you've pretty much lost money instantly when buying, as if you immediately turned around sold the same coin you just bought you'd take a loss.

Thinking of coins as an investment because of this inherent loss which generally constitutes dealers margins is a real quick way to ruin the hobby for someone. In fact I wish more collectors would take to heart the advice to not just buy coins; but take the time to sell a few yearly as well. And sell both to dealers as well as sell themselves online, to other collectors, etc. I think this would help make sure they don't end up shocked or unhappy that their coins aren't worth as much as they might have thought they were if and when they end up liquidating whether by choice or necessity.

 

Yes you learn a great deal about true value selling. It sobers you for when you go to buy.