The late August 1999 record public auction price of $4.14 million realized for an 1804 Draped Bust, Heraldic Eagle silver dollar has to once again raise the question regarding if rare coins can be a good investment.
What a question. Crunching the numbers may or may not justify investing in a rare coin. There are several ways to calculate the percentage the value of a coin rose during the time between when it was purchased for one price and sold later for a hopefully higher price. Obviously, the objective is to prove mathematically that the value rose faster than other potential investments where the same money could have been placed during the same period.
It isn't the objective of this article to answer this controversial math/investment question; however, the reader should remember statistics can be manipulated to either justify or debunk the argument that a rare coin may or may not be a good investment.
The recent record price does give a very brief look into the high-stakes investment game of some very rare coins.
First, understand these facts. Not everyone buying coins is a collector. Also, collectors will not pay virtually any price to get the coin they want.
There are several other things that must be understood when it comes to investing in, rather than collecting, rare coins. It is true that what is rare today will always be rare, while what is common today will always be common. In other words, don't speculate in something available in large quantities thinking you are the only person with this mindset. It just ain't so! You are not going to corner the market.
Quality does count. If you insist in buying coins as an investment rather than for hobby purposes, ensure you are buying the finest grade available, a truly problem-free coin and a coin that has never been cleaned, tooled or "improved." If you can't make this determination on your own use a third-party certification service to ensure the coin is genuine, graded properly and is as stated when you acquired it.
Why did you choose the coin you purchased as your investment? Did you choose the coin yourself, or did someone (probably the person selling it) recommend it to you? Do you know enough about the coin to argue why it should appreciate, or did you take someone else's advice out of your own ignorance regarding coin investments and price appreciation?
People tend to buy coins of their "home" country. Since the United States has the most powerful economy in the world, it is logical to expect U.S. coins to bring the highest prices in the world. In fact, this is true.
Don't be naive. True coin investors, be they dealers or collectors, either already have a prospective client to whom they plan to sell such expensive coins as soon as they pay for them, or they plan an immediate search-and-destroy mission to find a buyer. Some rare coins have been put into traveling displays or become the subject of hobby publication articles in an effort to draw attention to them, attention that should equate into an eventual sale. Without a quick turnover, the potential rare-coin investment can quickly become a liability. This is not the sort of investment you place in your portfolio and wait for it to gain interest and appreciate. You must actively, not passively, work with the item to guarantee it will sell for a profit following your purchase of it.
Coins, unlike stocks and bonds, are not a liquid investment. You can call a broker to turn your paper investments into cash. Do you plan to use your rare coin investment as spending money at face value if you can't sell it quickly? Collectible coins are a commodity. It takes time to sell coins. The commissions for assisting in such a sale can be hefty, depending on the vehicle chosen through which a sale is achieved.
Is true coin investing only for the high rollers? Not always, but many times this may be true. It does take money to make money.
Before you rush off to drop $4 million on a single coin (or some lesser amount for most of us mere mortals) think about what you are doing and if you have a plan regarding resale, beyond just waiting for the coin to appreciate magically on its own.
Maybe you'd be better off keeping coin collecting as a leisure time hobby while staying in mainstream stocks and bonds for your investments. Investing in rare coins isn't for everyone. Is it for you?
Richard Giedroyc is a numismatic writer, researcher, auction cataloger and coin dealer. He has been in the hobby and business most of his life, now having more than three decades experience in this fascinating hobby field. During this time Giedroyc has been the owner of Paris Bergman Galleries, owner of Classical Coin Newsletter, international editor of Coin World and owner of Giedroyc-Anderson Interesting World Coins. He is currently a numismatic consultant. He has written more than 2,000 byline numismatic stories and contributed to several coin catalogs.
Richard Giedroyc is a numismatic writer, researcher, auction cataloger and coin dealer. He has been in the hobby and business most of his life, now having more than three decades’ experience in this fascinating hobby field. During this time Giedroyc has been the owner of Paris Bergman Galleries, owner of Classical Coin Newsletter, international editor of Coin World and owner of Giedroyc-Anderson Interesting World Coins. He is currently a numismatic consultant. He has written more than 2,000 byline numismatic stories and contributed to several coin catalogs.
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