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Investing In Rare Coins Gives Mediocre Returns

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Pillar of the Community
United States
846 Posts
 Posted 03/07/2021  8:56 pm Show Profile   Bookmark this topic Add NumisEd to your friends list Get a Link to this Message
After listening to a couple of so-called Rare Coin (self-proclaimed) Experts on YouTube proclaiming that "investing is rare coins is a non-brainer", I decided to actually find out the FACTs and look at price history of several examples.
Guess what, investing in rare coins should be at the bottom of your list as typically returns over the long term are rather mediocre.Let's look at some examples.

A Golden Liberty Head $2.5 in MS64 condition would net you, - on average, negative return:



There are endless examples of these types of graphs where price, on average, simply goes down. I suppose that for business strike gold coins when the price reaches that of bullion, the coin will start tracking bullion. Moral of the Story, NEVER EVER pay (a lot) more than melt for any gold coin.

Here is another graph, for a Draped Bust Dollar in MS64 condition:



At first sight, this graph looks pretty good. Nice and steady rise with the occasional spike.
Unfortunately, upon closer inspection you see that the price, on average, "only" has risen 4x since the mid 80's, barely keeping up with inflation, whereas the stockmarket has risen about 25x!
However, if there is anything that these charts show is that you should buy when there is low interest in rare coins (slow and steady curve) and sell when there is a huge spike like the one in the mid 1980's.
Considering that we currently in another collectibles mania, it is best to sell and wait for the inevitable crash and loss of interest. I therefore feel convinced I made the right choice selling off my 19th century coins and wait for better (i.e. cheaper) times.
Edited by NumisEd
03/07/2021 8:58 pm
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 Posted 03/07/2021  9:23 pm  Show Profile   Bookmark this reply Add macmercury to your friends list Get a Link to this Reply
All collectibles are only worth the other person(s) willing to pay for it.

Like some I got some varieties that looks good on paper, but when I sell it may not sell at those prices, unless someone need it bad.

The Mercury Dimes Specialist!
Current project: US Dansco 7070 Album
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Valued Member
United States
204 Posts
 Posted 03/07/2021  9:44 pm  Show Profile   Bookmark this reply Add psuman08 to your friends list Get a Link to this Reply
My coin collection, while an investment, is more of a store of value. If I was looking for investment returns, it would all go in the stock market.
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 Posted 03/07/2021  9:51 pm  Show Profile   Bookmark this reply Add ijn1944 to your friends list Get a Link to this Reply
Think sports trading cards--Michael Jordan, Tom Brady, and Patrick Mahomes.
Edited by ijn1944
03/07/2021 9:57 pm
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Australia
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 Posted 03/07/2021  9:58 pm  Show Profile   Bookmark this reply Add sel_69l to your friends list Get a Link to this Reply
I have been collecting coins for most of my life.
A lifetime love and interest. My collection would have to be valued in the tens of thousands of dollars.
I agree that the return on long term investments in rare coins is very mediocre.
Long term investment in the stock market is far better, and is the basis of superannuation funds.

Unless you are a good entrepreneur, and have found a way of making lots of money running a highly successful business,
the best lifetime investment you can make is to buy your home with a mortgage early in life, and pay the mortgage off early. The 'investment' repayments you make don't attract tax, and are the equivalent of paying rent, except that you own your own home at the end, without having to pay any more payments. Or 'rent'.

Rare coin investing over a lifetime ranks a very poor second to buying your own home. You ignore the hype, and buy well, then hang on the coins for decades. The real profit is in learning about numismatics, and not intending to make a profit.

A professional investment advisor once told me:
"If you must buy coins or bullion (as I do), limit your 'investments?' in coins to no more that 5% of your total investments. Far better than buying drugs or alcohol.

Instead, pay your credit card debts off first, and then destroy the card. Use a debit card if you must.
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13582 Posts
 Posted 03/07/2021  10:15 pm  Show Profile   Bookmark this reply Add Sap to your friends list Get a Link to this Reply
Coins aren't technically an "investment" - they provide zero returns while you hold them (unlike blue chip stocks, which pay dividends, or even money in the bank which pays interest). The only profits (and losses) come about when you actually sell.

The technical term for buying and selling such items is "speculation", rather than "investment". And speculation is very little different from gambling. Informed gambling, perhaps; as a collector, we have some idea on which coins are historically highly sought after by collectors, and these will remain highly sought after by collectors, no matter the fad'n'fashion of the "investor" crowd, so prices are less likely to tank - but that's still "likely", not "certainty". Gambling, in other words.
Don't say "infinitely" when you mean "very"; otherwise, you'll have no word left when you want to talk about something really infinite. - C. S. Lewis
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 Posted 03/07/2021  10:20 pm  Show Profile   Bookmark this reply Add macmercury to your friends list Get a Link to this Reply

Quote:
A professional investment advisor once told me:
"If you must buy coins or bullion (as I do), limit your 'investments?' in coins to no more that 5% of your total investments. Far better than buying drugs or alcohol.


But I need my fixed. 5% ain't cutting it! Forget to add banning my head!

The Mercury Dimes Specialist!
Current project: US Dansco 7070 Album
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Edited by macmercury
03/07/2021 10:21 pm
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 Posted 03/07/2021  10:27 pm  Show Profile   Check Pacificoin's eBay Listings Bookmark this reply Add Pacificoin to your friends list Get a Link to this Reply
Investing in RARE coins is an absolute no brainer .
If you are Investing in Coins you have no brain !
I never recommend to my clients coins as an investment .
Pillar of the Community
United States
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 Posted 03/07/2021  10:53 pm  Show Profile   Bookmark this reply Add thq to your friends list Get a Link to this Reply
In 1995 I sold a stack of four common gold $10 eagles for $800 to buy a Breitling watch. Today the same stack is worth $4000....which is about what the watch would cost to replace. So in watch buying terms I'm even....

In dollar terms I'm WAY behind. Over 26 years the gold has a steady annual appreciation of 6.5%, whiich is much better than any CD has been over that period.
I don't know that past results predict future performance, but it's fair to say that stacking gold has had a far better return than hiding paper dollars in a mattress.

One last thing. I'm still wearing the watch. The last rebuild cost $1000, and I'd sell an eagle to do it again.
"Two minutes ago I would have sold my chances for a tired dime." Fred Astaire
Edited by thq
03/07/2021 11:02 pm
Bedrock of the Community
Australia
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 Posted 03/08/2021  01:09 am  Show Profile   Bookmark this reply Add sel_69l to your friends list Get a Link to this Reply
My avatar coin has increased in nominal dollar value from $700 AUD 1981 to $4200 AUD in 2021, over a period of 40 years.
Works out to be a compounded interest rate of 5% per year.
Average inflation rate over the same period for the AUD 3.8% per year.
When inflation is taken into account, the net compound investment rate works out to be 1.2% per year.
That, to my way of thinking, is a poor investment.
Also proves that you have to buy your coins well in the first place.

As stated above, investment and mortgage rates have worked out much better than that, but that also involved paying the mortgage paid off over 7 years, not the 25 years that the mortgage was set up for. Lots of interest on the mortgage was saved.
Edited by sel_69l
03/08/2021 01:15 am
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 Posted 03/08/2021  01:42 am  Show Profile   Bookmark this reply Add mrpapageorgio to your friends list Get a Link to this Reply
The coins I have I don't look at as something that will make me a millionaire one day, but since it's 99% numismatic bullion, more as something that's better to look at than stuffing money under the mattress and will hopefully at least keep up with inflation and appreciate over time.
Edited by mrpapageorgio
03/08/2021 01:45 am
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317 Posts
 Posted 03/08/2021  03:43 am  Show Profile   Bookmark this reply Add PNWType to your friends list Get a Link to this Reply
To agree with many others here, I don't think my coins are an investment, if I did I would focus just on the popular stuff instead. I do have some bullion and trust that that will continue to increase with time, but I certainly don't expect any huge returns by the time I'm dead.

Really I feel like if you're into coins for the returns, quick flipping with a profit margin is the best way to go, though that's not an investment either, that's a job.
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Canada
4062 Posts
 Posted 03/08/2021  05:05 am  Show Profile   Bookmark this reply Add oriole to your friends list Get a Link to this Reply
Coins, like any hobby, should be considered partly as entertainment.

Entertainment is an expense, not an investment.

What is your ROI for going to a movie once a month? Or a holiday once a year? Is the zero ROI a good reason not to do so?

Coins to me are not an investment, so the expense has to be controlled.

Valued Member
United States
358 Posts
 Posted 03/08/2021  06:59 am  Show Profile   Bookmark this reply Add PlumCrazy814 to your friends list Get a Link to this Reply

Quote:
Coins aren't technically an "investment" - they provide zero returns while you hold them (unlike blue chip stocks, which pay dividends, or even money in the bank which pays interest). The only profits (and losses) come about when you actually sell.


SAP nailed it. No return, no turns = no real income.
Pillar of the Community
United States
846 Posts
 Posted 03/08/2021  08:21 am  Show Profile   Bookmark this reply Add NumisEd to your friends list Get a Link to this Reply

Quote:
Investing in RARE coins is an absolute no brainer .


And which rare coin what that be?
Pillar of the Community
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 Posted 03/08/2021  08:54 am  Show Profile   Bookmark this reply Add hfjacinto to your friends list Get a Link to this Reply
You have to look at coins as a purchase, but like a purchase of art, collectibles, gear there maybe a return on investment. For example, one of my other hobbies is astrophotography. I have several telescopes and I've upgraded/changed out a few as my skills/objects demand. So what do I do will my older gear. Well I sold it all off. I've lost a little money on some transactions and in other cases I purchase used and sold for higher than I purchased. But unlike most stuff you buy, you can generally get some/a lot of money back.

Its the same with coins and currency, I don't have a lot of high end coins and most of my albums are filled with circulated coins. But I expect that in 20 years, I will be able to recoup some of what I paid. I've sold off items that I purchased cheap for a slight profit. Recently I sold off a $10 North Africa Note that I purchased for $20 for $40 on eBay. The note was in Fine shape but I got it cheap and sold it cheap.

Unlike a TV that you purchase for $1000 and 10 years later its worth $50, an ASE that I purchased 2 years ago for $17 is now worth $30. The low end of coins and currency tends to stay flat, while the high end can be crazy high or crazy low. A circulated Walking Liberty that you purchased for $10 a few years ago still has $9.15 in silver today, and you had a chance to enjoy it for all that time.

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