Determining the Right Grade to Buy for Investor Value.

Way, way back to your original post. You mentioned that many year wait for the coins to go up in value. One problem with that is if you go to some coin shows you would notice that probably 85% of the people there will not be around in 20 or more years. Anther problem with using coins as a possilbe investment is at the rate the Mint is producing so many varieties and quantities of coins, the same thing may happen that happened to Beanie Babies, US Postage stamps, Hot Wheel Cars, Baseball/Football cards, etc. Yes some still collect those things but the values sure aren't there anymore. There is a really great possibility that coins will end up the same soon enough.
Coins as an investment is really not to smart.

 

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Wrong. You have forgotten to account for the high transaction costs of buying/selling coins. Mr. Feld has hit on the other issues with your logic. Respectfully...Mike

 

So is now the right time to buy key dates coins?

According to this chart it appears a 30 % to 50% correction from the high to the start of this last run may happen.

http://www.pcgs.com/coinindex/keysallgraph.chtml

 

Coin shows are one of the only places I can go anymore and feel young.:hatch:

It seems highly probable that the huge turnover in the population of dealers and collectors over the next 20 years will have an impact on the hobby that might not be factored into the thinking of most collectors. Maybe it will be positive, maybe negative. The only thing for certain is that things will be different.

Regarding investments in coins, all things being equal, it would probably be easier to just purchase bullion coins if the only goal is investment.

 

I also have studying the coin index's technical patterns to determine the best point of entry. Buying at a pull back may not be such a bad idea.

 

One of the fallacies in the investment thinking is treating rare coins like a commodity.

They are not.

Treating rare coins as a commodity means one approaches them as an investor. In contrast, Mark, Doug, Mike, and others approach coins as numismatists. They understand why the investor mentality usually fails.

There are many subtleties and years of experience in Mark's big post above.

 

Actually some of us have made money off of coins looking at them as investments, I don't see what why that is an issue. If you are paying $1000 or more for a coin that is a lot of money to spend on an item that has a face value of $20 or less.

Isn't it smart to approach it as an investment?

Anyway I am not going to give investment advice in coins anymore as I think it is too complicated to be certain about what to buy other than what I know has worked for me.

based on the charts the key dates may drop in value, and the generics may be the place to be right now. Who would have ever guessed that the proof gold eagles would go for what they do right now, or the spouse coins would have crashed in mintages like they have.

I see people have paid crazy money for "rare" coins in the past and that may have to catch up with the market. For those buying only "bullion", as of today I have to say that "may" be smart to do. If gold silver and platinum keep rising like they are then they will do well regardless.

 

I agree.

When you spend money(and I mean MONEY) on a coin, you have to see it as an investment.. I mean.. bower's talks about them as investments in his book. some of you i think see it as a sin.. i guess it's just a different way of seeing things.. that's all.

 

Those would be investments too, just not the kind you want.

 

Not sure I follow.. but if you do lose then I would blame it on either not getting in at the right time, not paying an absorbently good price on it, or the investment went south..that's why one would have to diversify.

this is all my opinion, i'm no expert like some of you on this matter..it's just my opinion.

 

If, for whatever reason(s) you don't have the ability to buy the right coins at the right prices 1) you can easily lose money even if the "value" of the coins doesn't drop and 2) diversification wont make any difference/be of any help.

 

from an investors perspective, say on the issues of Morgan dollars one would be wise to invest in the 64/65 grades unless the date is scarce and not often at auction in the lower grade with upper grade survivors below 10 total TPG's.

 

I've made money off coins, but not using the investor mindset / analysis which BNB advocates. He is doing research per commodity thinking. Yes, there are areas of the coin market which behave like commodities. Bullion. Even common white Morgans act like commodities to some extent.

But those are not rare coins. Rare coins do not behave like commodities, cannot be analyzed like commodities, and cannot be bought and sold like commodities.

They cannot be understood by investors. Rare coins require the mind of a numismatist.

And that is what Mark Feld described above*... the mind and method of a numismatist.




* post #5

 

I agree totally.

 

I disagree, respectfully, Mark.

If one diversifies their coins, they are subjecting themselves to less risk. That's all I'm saying for that point.

If someone buys a coin at a more volatile grade, they may lose money but there is a better chance they may make money than buying at a less volatile grade that has less room for growth(based on historical price movements of that particular grade).

Example, look on PCGS's price guide off their website. The MS-65 1885 cc morgan historically seems to fluctuate in price more than a MS-63 Morgan. The range for the MS-65 morgan year over year has been $1300-$1500. whereas the MS-63 morgan kind of stays around the $600ish mark. Will that jump to $1000 five years from now? Who knows but I think it is unlikely.

 

This is hugely important. Huge huge huge.

 

Could you explain his point a little better? I don't think I'm totally clear on where he's going with it.

 

If you don't buy the right coins at the right prices (because you're buying off quality material and/or you're paying too much), it is highly unlikely that diversification will help. It will simply mean that you're buying different types of off quality coins and/or paying the wrong prices for them. Either way, the odds are stacked badly against you.

 

Just to add to Mark's thoughts (and I'm sorry if I am repeating myself, but I really think you are ignoring or not aware of this very important factor):

Please also consider the transaction costs in the coin market.

Said more bluntly, it's hard to make money when typical buy-sell spreads+ transaction costs are 25% or more.

So the thougth Mark articulated in the preceeding post applies here too -- the odds are stacked badly against you.

Don't believe me? Sell one of your new purchases (pick the one you like the least) and report back precisely what you find. I think your eyes will be opened -- I know mine were when I was in your shoes.

The conclusion I drew from a very similar "investment" position is that coins are a terrible investment, and if you're going to try and speculate with coins, you have to do it with coins that you can buy/sell for very low spreads, and IMO that's non-numismatic gold (think raw Maple Leaf, Krugerrand, or in some cases AGEs) and the similar silver and platinum issues. Sure they have little numismatic appeal (although many are quite attractive, IMO), but if an investment is your goal, they are a MUCH better choice than their numismatic counterparts.

Taking that one step farther, as a coin collector who does care about the value of my coins (i.e. I can't completely deny the fact that these are valuable items), I view many of my coin transactions as trying to preserve value rather than create it. Try and buy coins that are appealing for a price that is fair at a grade that is correct (or conservative) with the thought being if you limit your risk on the buy side, the sell side will take care of itself. I've had some success and some failures on the sell side, but that's another topic for another day...

Respectfully submitted and hoping to help...Mike