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 Replies: 33 / Views: 4,196 |
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Pillar of the Community
United States
7629 Posts |
I generally do not come up with the topics here, I am more of a responder than a writer so far as that goes. But one thing I have noticed here today going through the various posts is some gravely incorrect ideas regarding investing in coins. Let me expand, read along if you wish:
First VERY wrong idea - buying "graded" coins is always a better "investment"
Okay - it's a fact that coins encapsulated in third party grading service holders are a safer bet for those who are not completely sure of what they are doing when grading coins. It's also a fact that reselling coins in these holders is often easier than selling 'naked' coins in the 'raw'.
It could not be farther from the truth, however, to believe there's nothing left out there worth buying that is not in a 'graded' holder. This is where educating one's self comes into play. If you know what you are doing, there are TONS of great deals out there to be had for nearly any budget.
In fact, just because a lot of people subscribe to the idea that if it's worth anything it would be in a holder, you can capitalize on finding a lot of goodies JUST BECAUSE the 'raw' stuff gets passed over by those who supposedly know what they are doing. So alas - a lot of the 'best investments' are still 'raw'.
second VERY wrong idea - holding onto pocket change in bulk will eventually have enough value to pay off.
It is true that coins eventually gain value if left alone - yes, pretty much ALL of them. It is also true that a pocketful of change from 1961, regardless of what that change is, would sell for more than face value now. But would the benefit of that snapshot in time be worth it? Let's take a look...
So it's 1961 and Jack sees that the new Memorial cents are eventually going to be all that's left in circulation, so he gets busy pulling out all the wheats he has in his change. Over the period of six months he manages to amass $50 worth of wheat cents. He holds onto these as an "investment" for his children.
2011 rolls around (next month) and his son decides to sell off the door stop his dad put together so many years back. Realistically there's very little chance of a key date coin in the group, and a handful sampling showed about 90% post-war cents - which is exactly what would have been in change in 1961. He takes the bag to a dealer and is offered $225 for the bag. That's 4.5x face, so he takes it.
Now...if his dad had put the money into an account that grew at the rate of inflation (4.12%/annum over the years) that same $50 would be worth $362.33 now. Alas, there are FAR better investments than CDs at the rate of inflation - like mutual funds, and stocks.
MOST growth vehicles have an average annual return of 10%, which if invested and LEFT THERE would double every seven years. Forty nine years pass, and that $50 would have doubled SEVEN TIMES! $50 to $100 to $200 to $400 to $1,600 to $3,200 to $6,400 to $12,800! Wow...and what was that bag of wheat pennies worth? Gee, thanks Dad.
Investing in pocket change is a bad, bad, STUPID idea.
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Pillar of the Community
 United States
7629 Posts |
Third VERY wrong idea - Top-grade common coins will bring bigger money laterThis idea surrounds the thought that buying a common coin now (in high grade, of course) will always return a lot better in the future than spending a lot of money now on a scarce coin and hoping it goes up. Really? I can come up with countless examples where this idea has holes ALL over it. Yeah, sure - there are SOME modern coins that have REALLY paid of BIG for some people in the shorter haul. A 1963D Lincoln Cent in PCGS MS67RD purchased at auction for $1,100 sold a couple of years later for $1,800. Other examples exist, but I'm keeping this short. Folks - ANY coin with a mintage in the hundreds of millions to billions is common enough that everyone in the country could own a roll and there would still be some left over. If you go back to the 1830s many of the coins had a mintage in the tens of thousands or fewer, and proof coins from that era had mintages in the hundreds - maybe up to 5,000. Many of these coins have markets that are a little difficult to get into and a little difficult to understand at first, but ALL of them have a market, and ALL of them have nice returns if you do your homework and watch what's going on before acting upon impulse. If you want to "invest" in coins, best thing to do is research something scarce to rare, be ready to fork out a minimum of $5,000 for a year or two, and your return will almost always be nice. Of course there's risk, and it's not limited risk. But we're talking about investing, right?
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Pillar of the Community
United States
7629 Posts |
Bottom line is this...
If you want to invest your hard-earned cash in something that will bring a nice return...
DO NOT INVEST IN COINS
Buy into something that has a little better track record and doesn't have the completely fickle idea that there will always be someone out there with more money who wants it more than you do. Remember that coin collecting is a HOBBY!! The first thing to go by the way side in times of war and want is HOBBIES. The first thing to lose value when times are hard is collectibles! If you're not willing to ride the long-term ride with your collection, then don't bother investing in coins! Just collect them!
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Pillar of the Community
United States
958 Posts |
Not so sure about the mutal fund numbers .The 100x200x400x800x1600x3200 Thing does not always pan out in reality as they do in paper. But I DEF see your point about better investments for returns then coins Saw on a webisite a guy took 1000$ in 1970 and put it into a mutal fund. followed it and watched it grow and shrink. The fund took some huge hits in the late 70's late 80's early 90's 2001 and 2008 and if he cashed it in back in 2008 during it would have been a lil more then 1000$ sure it recovered alot in the 2009-2010 and started making money agian back up to $4000 but what if your 72 and need they money in 2001 or 2008 during a bad time. Not everyone can wait it out till it grows agian. Sure they can double triple. But a even every 10 years seems to take away huge gains I see your point about just grabbing random coins , inflation will outpace rise in coins value above face.Unless there is a key date or rare varitey that happened to make it into the bunch Also slabbed coins are eazy to sell and buy with out buyer fear of a coin being altered or cleaned. I mean lets be real when someone spends 1000$ on a coin they darn sure want to make sure it has not been improperly cleaned and retoned. But then you have a point if the coins is ungraded and not altered your prob gonna get a good deal on it being others passed it up.If you know what your doing When you look at the stats of coin values in 1990 versus 2010 on the history charts , its usually key ,semi key dates that have tripled or quadrupled in value .While the common stuff didnt do well and alot of the silver commons are just linked to the price in silver. The example about buying power is 1961 $5 in wheats , would have had $6.92 in buying power in another thread is also affected by what the person buys. As tecnology changes buying power changes in certian fields. For instance a person in 1990-1991 wants to buy a " top of the line computer up to date 386hz,color printer and 14.4 modem,40mb hd " that computer IBM would prob run them around $1500-$2000 While today a "up to date,wireless modem,lcd screen,200gig " might only cost 500-600 and on sale $499 So as technology chances some things are not effected by inflation but actually go down in value. Im sure the same with coins. Someone discoveres a rare coins 20 years ago and 3,000 more are discovered well then its not so rare anymore. Say someone thinks a key date CC Morgan dollar worth 5k today has to be worth 15-20k in 20 - 30years. Not so ,a saftey deposit box with 1000 of the same coin can be opened and flood the market with high grade examples bringing the value down. Same as if someone busted open a roll to find 50 double died 68 cents , the market would plumet Looks like coin investing is not a sure thing lots of factors. Coin discoveries of the same coin if rare ,econimic varibles,people intrest shift,collectors come and go |
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Valued Member
United States
286 Posts |
I am glad to have read this!
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Pillar of the Community
United States
7629 Posts |
Coppertop - A couple of good points, and a couple of misguided points. First, I said "most" growth investment vehicles have an average rate of 10%...tht's not all of them, and that's definitely not individual stocks. If managed properly and left alone, MOST of the time they will double every seven years if all dividends are reinvested. Second, buying consumer goods that depreciate in value as a rule is in no way similar to trying to invest in pocket change. Apples and oranges completely - you lost me. However, you made a great point in buying the rarity then having a ton more discovered. Gold coins under the sea, a new doubled die, top-pop moderns...it happens frequently. Someone might know what date and mint Morgan dollar it happened to when the vaults were opened back in the 70s. It was a nice semi-key until then, but the vaults revealed thousands upon thousands of them and their value tanked overnight. I think it was 1904-O? Anyhow, thank you for the reply. |
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Pillar of the Community
United States
764 Posts |
I'm sure Chuck's intent is not to deter anyone from using coins to make hefty profits. This can be done very effectively and can be a lot more financially rewarding than most other "investments." Most experienced collectors/dealers/investors of coins will agree that investment strategies cannot compare to knowledge. Someone who chooses to pick out particular coins because he or she believes that future demand will drive the value up may bring in a significant profit. However, another person who has years of knowledge with coins and absolutely no investment strategy may accumulate even higher profits. Here is a realistic example: Investor #1 sees a 1916 Standing Liberty quarter graded AG3 by ANACS and buys the coin for $2000 from investor #2 because he thinks it will go up in value. A few months later, the greysheet value spikes up and he sells it for $2800. Wow, a great investment! Now consider this possibility: Investor #1 sold a roll of dateless Standing Liberty quarters to Investor #3 a year prior to this big purchase for a 10% profit when silver rose in price. This roll was split up and Investor #1 bought one of the quarters for $5 when he noticed a slight difference in the design. He sent this coin to ANACS and it returned as a 1916 AG3, even without a readable date! This is the exact coin he sold for $2000. While Investor #1 made an $800 profit on a $2000 investment, Investor #2 made a $1995 profit on a $5 investment simply because he had the knowledge of the differences between a 1917 and a 1916 quarter. Recall that Investor #1 had the same opportunity before he sold the quarter at scrap value. Everyone who buys and sells coins will run into opportunities for profits. Knowledgable collectors may notice the opportunities while inexperienced ones may miss them. It is possible to make a ton of money from regular issue coins. If someone is an expert in grading uncirculated coins, he could take a box of cents, look through them, and pick out a handful to send to PCGS for grading. If they all come back as MS68 or MS69, he is probably going to gain a hefty profit. Opportunities can be found in junk bins as well. A lot of members here have probably found VAMs or die varieties that can be sold for much more than scrap in junk bins. What about those collectors that know the common date coins that become extremely rare in higher grades? Or those collectors that can tell the difference between a 1909VDB MS64 from a 1909VDB PR64? In all these cases, knowledge is the key to profit. Now that I've rambled for over half an hour, here's the main idea. There are incredible profits to be had from "investing" in coins, but one must have knowledge about them before the profits are obtainable. How does a collector get this knowledge? From experience, collecting, studying, etc. Having this knowledge is far more valuable than gambling on the chance a coin may increase in value. Basically, collecting coins as a hobby is generally the prerequisite to becoming a successful coin investor. |
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Pillar of the Community
United States
7629 Posts |
Nice that a half hour of typing takes five minutes to read. This either means I read fast or you need typing practice! (just kidding).
Thanks for clarifying and adding to the point. Knowledge is definitely king. There are two things that make good money in this world - education and talent...and when you can mix the two, you can do very well financially in any market.
Point to most readers here really is this:
Don't confuse yourself into believing all the cash you're dumping into shiny little round things is definitely going to be a hearty investment. It just doesn't work that way. Investing - no matter what you invest in - takes brains, a LOT of study, some errors made, and a painful amount of time. You're not going to get anywhere throwing money around at whatever tickles your fancy at any given point in time, and you sure won't get anywhere pulling coins out of circulation hoping they will gain value. It takes a lot more than that.
So, if you fall in this group, whomever you are, it's time to either get off the pot and start learning a LOT more about what you're doing, or just stop fooling yourself into believing you're investing and keep on collecting!
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Pillar of the Community
United States
958 Posts |
chuck replied "There are two things that make good money in this world - education and talent...and when you can mix the two, you can do very well financially in any market"
How do you explain paris hilton? karadshens sisters? jessica simpson ?
all dumb as rocks and have no talent !
LOL just kidding
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Pillar of the Community
United States
4989 Posts |
Being a successful investor requires (1) Patience, (2) Guts, and (3) Common Sense. Expert knowledge of stocks, bonds, or numismatics are not required and can sometimes work against you. If you just diversify and put 25% in stocks, 25% in bonds, 25% in bullion, and 25% in high end rarities you can't really go too wrong. Don't panic and you'll end up rich. Easy formula.
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Bedrock of the Community
Australia
21786 Posts |
Sounds like a strategy called 'diversification'! "Some Say" (sounds like the intro. to the Stig) it a time tested successful strategy!
I have not really thought about it, but I suppose I would be forced to say that my collection has become part of my investment strategy.
That's a bit sad in my case. I have built my collection because of my love for numismatics, and investment in coins has never really motivated me. I am perfectly happy to buy cheap coins that interest me. Helps with the budget, too!
Edited by sel_69l
12/14/2010 06:37 am
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Valued Member
United States
463 Posts |
another thing to consider is buy low and sell high, right now its imho not the best idea to buy any silver or other pms right now (maybe gold). Right now I just came into 14k playing poker and I would love to buy more silver but at around 30 an oz its pointless. I started buying at 15-17 an oz and I sold alot of those off except Morgan dollars and some other better coins. Variety is the key you cant just put everything into one thing and pray |
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Pillar of the Community
United States
3592 Posts |
[Variety is the key you cant just put everything into one thing and pray/]
I'll have to argue that one...I did put everything into one stock and prayed...it worked...my thoughts were that I would either retire early or end up like everybody else working till I was 70. I'm not an expert, but sometimes your "gut feelings" work very well.
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Pillar of the Community
United States
4989 Posts |
Asset allocation is really a great strategy. When everyone with a 100% stock portfolio was just dying in early 2009, I still had a huge swath of money (by my personal standards might not be much to some folks) in treasury bonds that I could redeploy into stocks. I had contemplated going all bonds in 2008 but had settled on a 55%/45% type bond/stock allocation. While not optimal, it was enough to buffer me from the most serious losses and keep a lot of capital available for redeployment at the market trough.
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Pillar of the Community
United States
3294 Posts |
And in 2008-9 I turned most of my cash into stocks. Today, I think I am up around 20% despite having BP as 50% of my portfolio before their little incident.
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Pillar of the Community
United States
5820 Posts |
Ditto Fenton!
I don't have much to spend now in buying coins I like as other debts keep me away from it, except coins from junk bin that other have missed.
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Replies: 33 / Views: 4,196 |
Posted 12/14/2010 12:03 am
