Are Rare Coins a Good Investment ?

[geejay50 10]

Hi Everybody,

 

This is a much traveled subject that has just two words as an answer...IT DEPENDS !!!

 

It all depends on what one buys, graded or ungraded,story line,Mintage vs Surviving stats, Quality and Ranking in pop report ,Unique?,Age of coin, market interest at that time ,Length of time after purchase, Eye appeal, Proof or Business strike, Timing, Bidder composition and many other factors including maybe the face of Mr Mandela??

 

I dont pretend to cover this subect in any serious depth save to say that with Platinum having fallen from $1903 to $859 per ounce over five years and the resulting crash in shares like Lonmin (98% plus along with Marikana !!) not to mention a 35% fall at least in MTN following the imminent $5 Billion fine incurred in Nigeria (100% quality rating of MTN in September 2015 by PSG on line???). We must have grave doubts about what we can make out of the Share market with companies who cannot be predicted to give us returns and analyzers who are actually misleading us. One can say that because one is not invested in MTN or Lonmin it does not affect us but do we know really where our pension funds are invested?? It all lacks transparency and the media reports make everybody deeply worried about the financial future.

 

When one invests in Coins, one does not depend on any of the aforementioned variables and uncontroll ables. A rare coin has a fixed mintage and with time and increase in collector interest, it remains an asset with an improving value that one is in direct control of to hold, sell or bequeath.

 

Warren Buffet said there are only two rules in stock market trading 1) Do not lose money 2) Remember rule no 1 !! Well this is not something investors in the JSE can always predict or be in control of no matter how astute and well read.

 

I do not want to brag and have certainly overpaid in the years I have collected for a variety of reasons but I can offer some tips to the collector who wants to also have a profitable collection.

1) Try to buy in a live market - The fixed price coin is often NOT a bargain- much better to have competing bidders to get to an actual market price 2) Be well read on previous prices e.g. Heritage Auction Archives excellent, Collectors with integrity who have records 3) Know everything about the coin Mintage, World Population Reports (register with NGC - its worth it) This is an International Hobby. 4) Dont trust Grading Companies who grade non numismatic coins and put them on a par with NGC/PCGS in those pop reports. 5) Look carefully at the ratings given to sellers before you buy. 6)Raw coins are risky to buy, the risk of not grading must be balanced by the price.Get second and third opinions on these 6) Beware the salesman who pressurises you with unsubstantiated claims of diminshing stocks and skyrocketing prices.

 

Some Stats from my records and you can make your own minds up :

 

Southern Rhodesian Gold 1966

I bought all three coins in 2006 separately Nine years ago.

1) 10 Shilling Pf66 Paid $145 (R870) Heritage Auction 2015 sold same coin $258-50 (R4125 incl) Gain in USD 8.7%p.a. Rand gain 41.6% p.a.

2) Pound Pf66 Paid $225 (R1350) Heritage Auction 2015 sold two Pf66 for $446.50 &$481.75 average price $464 (R7407 incl) Gain in USD 11.8%, Rand gain 49.8% p.a.

3) 5 Pound Pf65 Paid $1043 (R6258) Heritage Auction 2015 Sold Pf 66 for $2232.50 (R35,623incl) Gain in USD 12.67% p.a., Rand gain 52% p.a.

 

The above may well be seen as anecdotal and not reflective of the coin market as a whole. I have been told that there is little interest in Rhodesian coins. The bigger the coin in this group , the better the price growth.It has certainly comfortably outstripped inflation in spite of a Rand that has devalued from 6 down to 14 to the USD in the same period.

 

What do you think?

 

Geejay

 

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Edited November 27, 2015 by geejay50

[I N Collectables 10]

Hi Georg,

 

This is a lovely topic to discuss and can attract input from a lot of angles. Rare coins, in my view, are probably the best long term investment that there is. I say this not based solely on my preferences but if one has to look at statistics of the performance of choice rare coinage and compare it to say the stock market, equity funds and the like, one will find that rare coinage is a well performing tangible asset. Coins especially gold and silver will always have a timeless appeal, they have done so since the 6^th century BC and in times of uncertainty have always been a safe haven.

 

As you so described coinage is not subject to many of those volatile variables that affect the returns of other investments thus making it comparatively stable, the coin market does of course go through peaks and troughs but in my experience a truly rare, scare and beautiful coin will always get you a return (like you referenced, one just has to scroll through the Heritage archives and see the wonderful coins that have been offered and that have attracted huge sums). I remember not too long ago here on BidorBuy a Veldpond MS64 was sold for R 497 000, of course I do not know what the seller would have paid for it.

 

From my own memory I can give two examples of coins that I have sold for a decent profit:

 

1892 1/- NGC MS63 – Bought for R 16 000 in 2013 and sold for R 21 000 this year.

1890 ZAR Pattern Penny NGC MS64 – Bought for R 11 100 in 2014 and sold for R 18 000 this year.

 

What I have also found to be solid investments are AU graded ZAR coins (these are often overlooked by our market in my opinion). I had an 1894 6D AU50 that I bought for R750 on R1 auction and sold later for R 2000 in 2012 (I think). The variety of factors such as condition, mintage numbers, survival rate, age, relative scarcity, collector base and interest all play a part. Coins are definitely something that get better with age and the longer you are willing to hold on to them the better.

 

I too have burnt my fingers on numerous occasions, thinking of it now makes me cringe however these experiences are vital in your development, I prefer to term them “school fees”. Before buying a rare coin I can offer the following advice: Be knowledgeable about your purchase, compare the price to recent prices fetched and also historical date to pick up a trend. If buying a graded coin, aim for the higher grades first and then settle for lower if out of budget, however one should always buy a coin and not the slab ( you rather have ten coins worth R1000 EACH than 100 coins worth R100 each, quality over quantity). If buying a raw coin, understand the conditions which will render the coin a no grader (I still do not fully understand these myself) and enlist the help of a reliable collector or dealer. Use a loupe to closely inspect the coin and learn to pinpoint which spots on the coin you should look at to gauge the grade eg jewels in the crown of a George V coin.

 

And remember: It’s not so much about the destination as it is about the journey.

 

Just some of my thoughts,

Mohammed

 

[jwither 10]

Both of you should be coin salesmen. What I see in both of your posts sums up the "cheer leading" on this forum since I started posting in 2009.

 

Here is my rebuttal to the idea that coins possess the financial merits you both claim.

 

http://forum.bidorbuy.co.za/forum/bidorbuy-category-discussion/coins-and-notes-for-the-numismatist/20521-coins-asset-protection-and-wealth-preservation

 

Here is my rebuttal to the claim that the prospects for Southern Rhodesia are financially meaningful..

 

http://forum.bidorbuy.co.za/forum/bidorbuy-category-discussion/coins-and-notes-for-the-numismatist/20452-evaluating-collector-and-investor-demand-outside-of-south-africa

 

For South African coins specifically, they are certainly better values than they were in 2011. However, to those who are reading this topic but do not comment, all you need to know is that no matter how much prices increase, you are never going to hear from anyone else that the coins favored by those on this forum are anything but compelling values. If you do not believe me, go back and read the historical posts which make it apparent who has been more objective. The only exceptions have been for Mandela coins (which no one who posts here with any regularity has bought anyway) or sold by the SA Coin Shop. But of course, not for the too numerous to count coins listed on BoB which are listed repeatedly for absurd fantasy prices over and over again.. Apparently, those are fairly priced. You are also never going to hear that for those who post here who have made good or outsized returns, that at least as many lost their proverbial shirts during and after the 2011 market peak. As in the "Wizard of Oz", you should ignore the "man behind the curtain", except that unfortunately, it's more like the elephant in the room.

 

In summary, here is my opinion of what anyone who "invests" in coins needs to know:

 

They are collectible trinkets which no one needs for any purpose whatsoever;

They have and will retain (some) value but are a thinly traded market. They are not liquid except for bullion substitutes, regardless of what anyone here tells you to the contrary;

Only buy them with discretionary funds where you should be prepared to lose most of your "investment";

They are no substitute for liquid assets, are not a form of savings and I certainly wouldn't place most of my retirement money in them;

Contrary to the (implied) claims in historical posts on this form, most of the coins profiled here by others aside from myself are disproportionately among the most overpriced and worst financial values;

The supply being fixed isn't as important as the size of the collector base who wants it. US coins are a lot more common than yours, yet the price level is much higher. What your market lacks is enough real collectors (as opposed to "investors" who are more speculator than collector) which in many instances are even scarcer than the coins available to be bought.

The growth prospects for Union are limited because there is a shortage of coins which collectors in your country want to buy. So how exactly is this collector base supposed to increase substantially?

 

To close on a more positive note, in another topic, I listed the four methods which can be used to trade coins for profit. Of these four, for ZAR and union, the most realistic at this point is the buy and hold method because the arbitrage opportunities with raw coins aren't what they used to be. I agree that any coins actually bought at a "reasonable" price have above average return opportunities versus traditional assets classes. For example, if your market catches a bid from a future run up in metal prices. However, all of you need to concurrently keep in mind that the coins most often discussed here are not likely to remotely appreciate from current levels (much less those at the peak) as proponents here imply. For this to happen concurrently implies that most collectors will be priced out of most or even all of the coins they want to buy. That outcome is a recipe for widget trading and there is no reason to believe it whatsoever.

 

 

[geejay50 10]

Both of you should be coin salesmen. What I see in both of your posts sums up the "cheer leading" on this forum since I started posting in 2009.

 

Here is my rebuttal to the idea that coins possess the financial merits you both claim

 

They are collectible trinkets which no one needs for any purpose whatsoever;

They have and will retain (some) value but are a thinly traded market. They are not liquid except for bullion substitutes, regardless of what anyone here tells you to the contrary;

Only buy them with discretionary funds where you should be prepared to lose most of your "investment";

They are no substitute for liquid assets, are not a form of savings and I certainly wouldn't place most of my retirement money in them;

Contrary to the (implied) claims in historical posts on this form, most of the coins profiled here by others aside from myself are disproportionately among the most overpriced and worst financial values;

The supply being fixed isn't as important as the size of the collector base who wants it. US coins are a lot more common than yours, yet the price level is much higher. What your market lacks is enough real collectors (as opposed to "investors" who are more speculator than collector) which in many instances are even scarcer than the coins available to be bought.

The growth prospects for Union are limited because there is a shortage of coins which collectors in your country want to buy. So how exactly is this collector base supposed to increase substantially?

 

Edited November 29, 2015 by geejay50

[geejay50 10]

Ernesto,

 

We have had this discussion many times before as you so rightly have referred to. Gold , Diamonds and other Gems are also mostly trinkets with little or no intrinsic value just like rare coins. That does not mean they can be used as solid inflation beating investments which when liquidated will give the holder a considerable return.

 

The reason why I gave some concrete details of coin appreciation as also backed up by Mohammed is precisely because I want the collector base to broaden.Collectors like me with more than ten years of collection have records and experience to support new and existing collectors in their choice of this beautiful hobby *** investment. Most collectors for their own reasons are quiet and do not tell the public what they own or how much . Their number will stay unknown to all of us and can only be guessed at.

 

Many of these old coins have a beauty and story line that gives the collector enduring pleasure - like no share or bullion. As Mohammed so rightly said, its the journey rather than the destination that keeps these collectors going - take the Griqua coins for example - we have a flimsy contact in these coins with the real people who lived in a country that was truly as *** created it - where lions leopards and other predators were really roaming free and still threatened the lives of people (Schoeman's Book) as they had for millenia before - before western so called civilization in the form of missionaries arrived to tell people how to live, where to live,who to marry not to mention who to worship. If this does not move one to collect then by all means stick to the inanimate boring so called liquid investments like shares or bullion that in 1931 lost so much value that people committed suicide in droves.

 

"All that is complex is unnecessary and it is simple that is needed" That is a saying coming from Mikhail Kalashnikov (1919-2013) who with his simple self cleaning rifle design created a rifle that has been second to none in history. So too are coins, an age old expression of value that in their simple beauty will captivate collectors and those who come after them.

 

Geejay

Edited November 29, 2015 by geejay50

[jwither 10]

Geejay,

 

The reason I provide the responses you see is because your posts and those of everyone else here are so one sided.. Your posts and those of every single other contributor I have ever read here are not interested in providing an objective assessment of the financial merits but in promoting them. Since no one else is going to provide an impartial assessment, I am going to do it.

 

The Rhodesian coin you just used is yet another example. This coin isn't remotely representative of the coins from that series. Without looking in my catalog, my recollection is it is one of only two gold coins in the entire series which are the only "investment" coins along with the 1953 Rhodes crown. As a quasi-bullion substitute, its financial profile doesn't resemble any of the other coins you collect or have profiled before and to imply that it does is once again misleading.

 

I am aware of the intangibles of collecting you just described. From the "investment" aspect, this doesn't change any of the claims in my prior comments or those I made in the past. Using intangibles as the primary basis of any financial claim is an attempt to use emotional considerations to persuade others to your point of view. From a collecting aspect, the same intangibles apply now as they did 10 years ago when the coins were much cheaper and you bought them and doesn't say anything about their "investment" potential. The coin is the same coin regardless of what it is worth.

 

Since I know all of you still disagree with my claims, take a look at the charts in the link below. The link is to the PCGS Coin Universe 3000 Index which is a "collector coin" index but the others are "investment" indices. Except for the "Key Dates and Rarities Index", ALL of them peaked WAY BACK in 1989. Yes, you read that correctly. I can't tell you the specific coins which comprise these indices offhand but it should be apparent that even over long periods of time, that coins are not necessarily compelling long term "investments".

 

So now, what is the similarity between these indices and your market? Both price spikes occurred immediately after the widespread introduction of TPG grading.

 

What are the differences?

 

First, all of you measure your returns in a far less stable currency, the ZAR (Rand). So many of you have now or will in the future a "profit" because your currency is losing so much value. And in making this comment, it sure isn't because I think the USD is an effective long term store of value either.

 

Second, obviously the supply of your coins is much lower but this is more than offset by the difference in demand. I have commented on the obstacles a limited supply poses on numerous occasions.

 

Third, the price level in your market is much lower but this also needs to considered in the context of what is available to be bought. I have also commented on obstacles this poses to higher prices.

 

So now, the question then becomes, what makes any of you believe that South African coins are immune to this type of price performance? The only one that I can see is that the declines could be compressed in a shorter time frame but from a purchasing power standpoint, I equally expect many of your coins to be worth less years or even decades from now than in 2011 for the same reason. The market up to YE 2011 was a BUBBLE and not remotely normal. The best argument I can think of for a repeat is that since it is so puny, a handful of buyers can literally recreate it temporarily should they choose to do so.

 

Lastly, if you are really interested in expanding the collector base, why don't you at least make some attempt at being impartial? Do you really believe that engaging in unsubstantiated hyperbole is an effective way to promote coins as a hobby? Or just increase the number of uninformed speculators as occurred up to the 2011 peak?

 

http://www.pcgs.com/prices/frame.aspx?type=coinindex&filename=index