How would you put together a diversified coin investment portfolio?

I've been thinking that it might be an interesting experiment to take $5k (maybe $5500, equivalent to the max Roth IRA yearly contribution), invest it in a longterm portfolio of coins, and see how it performs compared to the stock market. I wouldn't be flipping the coins on a short-term basis, as a typical investment portfolio wouldn't have that much churn. Rather, I would buy and hold for at least a year (if not longer) before selling. I honestly don't think I'd beat the market, but I'd be curious to see how it pans out.


If you were going to try to put together a diversified investment portfolio of coins with $5k, how would you invest it? Would you split it up somehow, like 40% in coins with higher risk/upside (new Mint commems?) and 60% in "blue chip" coins with stable prices and more modest upside (common-date BU morgans?). Or perhaps a balance between U.S. and international exposure, with 70% U.S. coins and 30% world coins. Would you invest in a handle of higher-value coins, or a few dozen lower-value coins? Or maybe just put all your money into one basket with a $5k coin? Interested to see how people here would think through this.

 

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I wouldn't

 

I cannot possibly condone such a thing. If you think of a year as anything fundamentally different than "10 seconds", coins are not for you. Coins have historically appreciated over decades. Anything shorter is churn. Specifically, there seems to be a fairly strong headwind for the next several years. Short term profits seem unlikely. Even major seven-figure rarities held for several years are now lately many times bringing negative returns to their owners. This is a fickle market indeed.

It sounds weird but, "He gets gets into coins to turn a profit, won't, and he who is unconcerned with profit, will."

 

Good points, though I should clarify my original purpose a bit. I'm not expecting to beat the market with coins - I intended this more as a thought experiment, to evaluate how a collector like myself (with an average level of experience) could perform against the stock market. If anything, the ultimate lesson of this experiment would be a warning against trying to invest in coins. Coins are sometimes promoted—often by unethical companies looking to take advantage of investors—as a superior investment opportunity. If a collector like me, with over a decade of experience, can't beat the market than how can any non-collector expect to achieve better results when buying coins from a newspaper ad?

 

In that case, you may fire when ready, Gridley. I suspect you'll prove what you suspect you will, much to the chagrin of the Richard Nachbars and Patrick Hellers of the world. "Numismatic Investment Counselors" indeed! Every generation apparently needs its own snake oil selling con men.

 

I was looking at the PCGS3000 index, and over the last year, it has lost nearly 2k in value. The stock market on the other hand, has gone up around 1500 points in the last year. That is not to say that no-one has made money in the coin market over the last year. I believe the best way to make money in the coin market is A:Being able to grade as well (ok, this can be debated, but they do set the market IE PCGS, regardless of the grading) as the top TPG's and know what the coin will bring on the market in that respective slab if you were to get it graded. As we all know, Many sellers are NOT good at grading, or pricing. They try to sell to the less experienced, coins that are not real or have been cleaned.. In other words, you have to know your stuff to know where you can add value and turn a profit. B. Die Varieties. Those who know their varieties can often add value and turn a profit by cherrypicking the right coins. I'm sure most of us here have done that a few times.

 

Still most likely won't beat the stock market though

 

Unless you "conveniently" limit your years of comparison in your advertisement to the atypical years when it does. Sound familiar?

 

Even in the stock market, the time period you're talking about would make you more of a trader than a true investor.

I think it would be an interesting experiment, but only if you buy and hold for at least five years, preferably much longer.

 

That's how they sucker in the most rookie investers.

 

But the stock market won't go up forever.

 

There's an axiom in stock trading that could very well apply to the current coin market.....'never catch a falling knife'.

 

If I have $5k to play with I'd buy a few MS63-64 silver classic type coins.

 

To be responsive to the OP's query, you're talking about commodities with a static supply curve and a moveable demand curve, so the key to profit (positive change in price) is to anticipate the NEXT great positive change in demand patterns. Why else do you think even this site is so rampant with cheerleading shill artists? It's all about hyping new demand. How do you anticipate new demand? As Yogi Berra said, "you can observe a lot just by watching". Better still, if you have a spy inside a major numismatic publishing house, so much the better.

Nothing that has already happened matters. The only thing that counts is what happens next to change demand.

 

That's true- the reason I chose 1yr as the minimum threshold was to align it with the short-term vs. long-term capital gains tax tradeoff you might make in a stock trading account.

To return to the original question, here's one way I might think about putting together a portfolio.

I'd first take about 50% of the money ($2500) and put it into some of the more broadly-popular 20th c. U.S. keys, in TPG plastic:
1916-D Mercury G-4 ~$750
1909-S VDB VG-8 ~$600
1932-D Washington XF-40 ~$200
1921 Peace MS-63 ~$400
1881-CC Morgan MS-64 ~$600

25% ($1250) I'd put into U.S. pre-33 gold:
Common date Indian Head half eagle AU-58 ~$450
Common date Indian eagle MS-62 ~$800

10% ($500) I'd put into world coins:
1934 China junk dollar MS-63 ~$200
GBr trade dollar MS-63 ~$250
Late 19th c. Mexico 8 reales AU ~$50

10% ($500) I'd put into ancients, also in plastic (sorry, ancients collectors!):
Alexander drachm F - ~$200
Marc Antony galley legion denarius F ~ $300

The remaining 5% I'd put into raw or MS-69 moderns (whatever grade doesn't carry a premium), or maybe just leave liquid. I don't track moderns, so I'm just spitballing here:
Marshals commem. MS dollar - $50
4 other commem. MS dollars - $200


Of course, this completely ignores many other important segments of coin collecting, such as colonials, classic U.S., varieties, early commems, etc. With a limit of $5000, it's very difficult to build out a truly diversified portfolio.

 

If it were me, I'd *speculate* in Starving Liberty Zombucks- final mintage 38,942.

 

You have your list on paper see how it is in one year ?

 

Susan B Anthony dollars! They'll make you rich! Also, look at heavily milk spotted ASEs, highest grade the best.

 

The coins would have to go up at least 10% to break every if sold in any auction in a one year time frame or any time frame