Should I invest in rare coins? (Part 1)
(Don't forget to read Should I be investing in rare coins? (Part 2): Auctions)
Should I invest in rare coins?
With gold on the brink of $1,000 an ounce and the stock market in a bear market, this question is being asked by more and more investors. Most articles that I read about this subject are authored by dealers who have an obvious bias towards promoting rare coins in both good times and bad. As a collector/investor in both gold (the commodity) and rare coins (mainly pre-1933 U.S. gold), I want to share a few lessons that I have learned over the years that I think you should know before you make the plunge into rare coins. Some of these lessons are things that your coin dealer may not tell you. I know mine didn’t.
Rare coins versus bullion coins
First, I want to define what I mean by rare coins. These would be coins whose price is determined by “numismatic value” rather than the price of their precious metal content. Bullion coins are those whose value is determined by their precious metal content, usually platinum, gold, or silver. Many countries, including the United States, sell bullion coins. These include the Canadian Maple Leaf, South African Krugerrand, and U.S. American Eagle.
When I talk about rare coins, I am referring to coins with a large numismatic value. Many pre-1933 gold coins are so abundant they have very little numismatic value and are just another way to invest in gold bullion, but many others have large numismatic values that run into the thousands - even millions - of dollars above the value of their gold content. For example, a recent 1856-O $20 gold double eagle, with a little less than 1 ounce of gold content, was sold to a collector for $542,000. That is more than $541,000 above the current price of the gold content of that coin. Now that is a rare gold coin with a large numismatic value!
Things your rare coin dealer may not tell you
Remember the days when it seemed all mutual funds were loaded with fees? Front-end loads! Back-end loads! 12b-1 fees! In my next article, I will take a look at how rare coin investing is more than just a nostalgic look back at those days. There are times when one has to wonder who really profits from investing in rare coins, the dealer or the investor.
Should I be investing in rare coins? (Part 2): Auctions
The Expert's Guide to Collecting & Investing in Rare Coins by Q. David Bowers. You will not find a better book on this subject.