Are Coins A Good Investment?

Last week I cashed in some coins I no longer wanted. I put the money back into coins, but it was a cash transaction - no barter or dealing. I made money: $675 worth of coins brought $1087. Retail for the coins is considerably more, but unless I take a chance on ebay or Heritage I pretty much have to live with a dealer's margin, which in this case was around 50% over wholesale on collectable coins, and 10-20% on bullion. On average I had held these coins 12 years. That works out to 4% interest - about what I would have gotten if I had put the money into a CD. Most of the gain was due to gold's recent appreciation in value, and not due to any intrinsic rarity (ie the whizzed 1892-O eagle increased in % value as much as the 1891-cc eagle in AU - as said before, it's hard to beat the margin between retail and wholesale on collectables).

I'd surmise that I could have made more if I hadn't bought the coins at retail originally (ie if I was a dealer), but that wouldn't have changed the outcome on the gold by that much because it's primarily bullion driven. If I had waited longer, maybe the rate of return would have improved, too, but 12 years is already a pretty good wait. If I had picked better (for instance, if I had put all the money into 1938-D walkers or 1889-cc dollars in 1995) I would have done better, too. But I could just as well have put the money into Isabella quarters or other commems and gotten nothing. And even with the best picks I would still be up against that high margin on the mid-value collectable. An 1889-cc dollar listed at $600 might wholesale at $400, and then only if a dealer happened to need it. Over 12 years the bullion coins worked pretty well I'd say.

In the 12 year course, I conclude that if I do it right, the coins will hold their value against inflation but not much more. That's why it's a hobby for me, not retirement savings, and why my "earnings" got plowed right back in to new coins I liked better than the old ones.

I think coins can be a good investment, but I'm in it for the adventure and the hunt, not really in it to profit.

Here's an interesting question. Why does the price of gold/silver affect numismatics? The obvious answer is that many coins are made out of those metals. But when, say, a silver coin has a melt value of $8 and a numismatic value of $1000 is it really sensitive to the price of silver? Visa versa for gold examples, and I can't see why copper coins would be affected at all.

I pulled out a 1996 Coin World to check some old prices. At that time common $20 Libs and St. Gaudens EF's were selling for $490 at a time when bullion was $400/oz, or about $100 premium over bullion. At today's prices the premium is lower, and if gold went to $2000/oz there would be none at all. Who could afford to collect common date coins?

The smaller denominations - quarter libs, half eagle and eagle Indians - carry some premium over bullion, but in general not as much as they carried in 1996. For instance, the price of a common $10 Indian is the same today at $700 bullion as it was in 1996 at $400 bullion. The coin still sells at a premium over melt, but not by nearly as much.

Rare gold is a whole different cat. It acts independently of bullion, but it has to be REALLY rare to appreciate, IMHO. For instance, 1874-s half eagles across all grades sell today for the same or less than they did in 1996, with a mintage of 16,000. This certainly beats the rarity of a 1909-SVDB cent, or a 1901-S quarter, but it doesn't seem to matter in an unpopular series where every other date has similar rarity. Now if the coin were an MS-65, or the mintage was below 1000, or it were a Charlotte or CC, it would be a whole different matter. I personally feel that this makes these coins interesting. You can own a genuine rarity in F-VF-EF for not much more than melt (and believe me, they aren't all that easy to find in your average coin shop or show). It's fun to find one, but buy it as near melt as you can and don't count on it appreciating any faster than bullion.

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coins are not an investment

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Even by the strictest of definitions coins are a true and viable investment. Anything that can increase in value due to supply and demand are investments. It doesn't matter if you're talking about stocks, real estate, precious gems, collectibles (coins), or anything else for that matter.

I am thinking about liquidating my entire coin holding and re-invest in the USPS "forever stamp."

I'd argue that you have to have a grand slam home run to make a decent return in even the medium term (6-10 years). If like me you buy at retail and sell at wholesale, the dealer's margin eats up even a 50-100% gain in value pretty fast. Over decades that goes away. If we could buy at 1960's prices we'd all be millionaires no matter what series we bought. But in the 1960's I didn't have the means or knowledge to make those buys.....

I have been building mine to keep as my legacy and to pass along as a "heirloom" more so than an investment. My hopes are that my descendants will reflect back about my son and I putting our collection together and enjoy them for many generations to come and to NOT sell them. If you think about it, if a coin is already a 100 years old the odds of it not being here 100 years from now are very possible as people already have them in a collection and will not be circulating it, therefore it will probably still be in about the same condition it was when it was taken out of circulation.

With that in mind, I am very choosy with what I buy and how much I pay, I always look for a deal. I don't mind sharing either, if I find a coin I want to upgrade, I will pass it along so other collector's can enjoy them. Typically, I tend to stick to the lower range of the mintage's and the better conditions, not for an investment but they look the best for everyone to enjoy!