Coins - Investment or Folly?

Over the years many people have collected coins as an investment. It occured to me recently, however, that this may in fact be a folly.

Any investment must increase in value by more than the rate of inflation.

Before decimalisation in the UK, around 1970, a bag of crisps (chips to the Americans) cost me 2 and a half old pennies (2.5d). In today's market the same bag of crisps costs around 50 pence (10/ in predecimal). Yest the two pennies and one half peny which would have bought me the crisps now retail for about 10 pence each (if one is lucky) or 30 pence for all three. Thus they have depreciated in value by roughly 50%.

I remember people holding on to the 1973 commemorative 50ps believeing they would be worth something in the future, they are now worth less in real terms than they were in 1973.

Silver and gold have increased in value over the past 40 years, but that's not strictly coin collecting. It's bullion hoarding which may or may not be a different matter.


Matt

You have only used a small part of the coin market to test your theory i bet if you looked at the whole of the coin market you would see many coins which would have made sensible or even highly proffitable investments.

Also many people struggle to grasp just what  the term investment actualy means. For example most people see it purly as putting capital into something in order to gain capital over time which for many is true.

But for many an investment isnt nessisarily about creating wealth but protecting it. Lets say i was a multi millionaire and i had a house and i put the rest of my money in the bank and descided to retire i could live comfotably for the rest of my life assumeing the bank dosent go bankrupt as if it does all i have is my house. So i must move my wealth about a bit to keep it safe, some in the bank some in property, shares antiques, coins etc some will go up some will go down but the chances of waking up one day and reading the paper in the morning do discover im pennyless would be very low.

Quote: alastairYou have only used a small part of the coin market to test your theory

You mean I have presented only a small part of the coin market to support my claim.

I have thousands of coins, I can tell you they are not worth what they were when they were minted. Some of the bullion coins have increased in value in real terms, but of the base metal coins, with the rare exceptions of peculiarities, they have not.

Investment is about financial gain. The notion of protecting one's wealth by investing it in a spread portfolio is a folly propagated by brokers (I was similarly cynical about endowment mortgages, private pensions and payment protection insurance on loans - on all three occassions I was considered an idiot by the public and bankers alike. Like the little boy in the story of Emperors New Clothes I feel vindicated on all three counts).

I collect primarily from an interest in  social history, but recently poverty led me to consider investing in my daughter's future. I now suspect that investment to be a folly.

Consider a French 10 franc coin minted just before France joined the Euro. At the time that coin had a buying power (value) of about £1 or $1.60 US and now? In Britain it is worth about 5p or $0.07 US. Not a great investment!

Matt

I agree that their are thousands of coins which are well below the value they were minted at however if a person buys coins purely as an investment they are free to choose from millions of different coins and their types and variations.

 If someone did to buy these or keep these coins from their change as an investment then they would have lost a lot of money however if they bought say Saxon coins instead they would probably be in a healthy profit.

The coins that are now worth a fraction of their original circulating value and lost anyone who chose to invest in them for financial reward a lot of money could now be a good bet. If a coin is now worth 5p its possible their might be demand for it in the future and it could make a good long term investment for a buyer today and if not who cares about losing 5p.

I still think that a rich person should invest to protect their wealth but if it was me i would not trust those  swine at the banks advise me on how to do it.

OK, so it's Friday and I'm in for a change, so here's my opinion   

I recall several years ago discussing the concept of buying antqiues as an investment with some associates in the local pub (the best debates are born in the boozer!). The idea in simplistics terms would be to buy a "100 year old wooden chair" with the notion that it's value will increase overtime and one could potentially realise a profit after selling said antique in 10 years time.

Now, before we continue we should remember that the old wooden chair is exactly that - an old wooden chair. Imagine a identical replica of the chair was made using brand new materials and modern manufacturing techniques. The old chair would be less sturdy, chipped perhaps, faded, generally damaged etc. ... even an "excellent example" of a 100 year old chair would be less perfect than the brand new identical copy. So why would anyone spend for example £250 on the old chair when they could have an identical new chair for £100 - it's just illogical.

To me at least, the answer to this question is either; -
a) antiques investment in general in nothing more than a self-fulfilling prophecy i.e. this old *thing* cost the equivalent of £1 (taking into consideration inflation) when it was new 10 years ago, and now someone is selling it for £10, so it MUST be worth £100 in another 10 years!
b) someone may have a passionate desire to own an original "100 year old wooden chair", perhaps for nostaglia or a setimental reason (e.g. ther grandparents had the exact one in their house and it reminds them of their childhood). Then factor in an ever increasing global population, and the probability that the number of "old wooden chair"'s has decreased over time (breakages, fires, hurricanes, anything at all that would cause the demise of a wooden chair!    ) .... and then you can apply the commonly accepted economic dynamic of supply & demand; a increase in demand and/or a decrease in supply will increase the value of the object/commodity.
c) a bit of both.

So, perhaps the 10 Francs coin 10 years on is not worth it's value when legal tender. But perhaps the dynamics determining it's value will shift. Perhaps the French will start reproducing at an unprecented rate and in 20 years time there could be a billion French people eager to own one of the shinning metal disc objects that their grandparents used as a form of currency   

There's my 10 Francs worth

With all due respect to those far more experienced and learned than myself, it appears to me that the argument offered does not make sense. The subject refers to investing in coins, which as far as I'm aware many people do, and some very successfully. Surely, though, the successful investments would be in coins which are already 'of an age' and will presumably increase in value as time goes on. However, the example that was used about investing in circulating currency and then watching it devalue when it becomes demonetized does not sound logical - it would be like taking your money and buying ... well, money, Am I right or have I missed something?

This begs the question, are you an investor or a collector?

For investment purposes it's better to buy mutual funds but if you really, really want coins then buy the ASE's from the US mint. Other than that there is no investment value in coins.

Let me explain the last remark a little further. I don't mean that it is impossible to turn a profit on coins by careful buying and selling. Buy high and sell low, in simple terms. That however is trading rather than investing. Investing implies a buy and hold strategy but for coins this isn't valid for a variety of reasons, mostly related to cynical over production of "investment" coins which will never produce a return and a lacl of interest in collecting depressing demand. (the latter being influenced by the former)

Collecting is different. The value of a coin is a neccessary evil, not a profit opportunity. I'm a collector and nothing would please me more than to see coin prices fall by 90%, it would slash the value of my collection but as I don't plan on flipping it for a fast buck it's just an abstract value. Buying Victorian crowns for $5 each would be nice though. A collector (normally) tries to put together complete sets and date runs whereas the investor really doesn't care if all his Krugerrands have the same date or not.

Of course a collector must live and trade in the real world, competing in the same market as investors. As has been said before, the antics of the "melt" crowd make silver coins an unrealistic buy at present. They WILL fall in price once the big boys decide it's time to leave the small investors holding the baby. If anyone doubts this, then I have some beachfront property in Arizona to sell you. Large investors (ref. Bros. Hunt) have been using leveraged buying to pump and dump commodities for decades. The advent of a silver futures market where no physical metal ever changes hands has not only made it easier, it has made the inevitable crash that much more dramatic. I don't care what Glenn Beck gets paid to say, anyone investing in precious metals is going to lose their shirt. The shysters (with Federal blessing) are now even going so far as to persuade people to convert their 401k's into "gold backed pension plans". WHAT IS WRONG WITH THESE PEOPLE?

I still collect silver coins, but not very actively. I stopped entirely while silver was $50 per ounce, and I'm concentrating on base metal coins right now. There will always be a demand for rare coins, in terms of mintage or condition and these represent the best value around currently. Anything minted after around 1970 will never appreciate in value much because of the huge mintages where runs of hundreds of millions are common. I collect modern US coins but I know they will be worth about the same in 20 or even 50 years.

Please, please, please do not regard coins as a valid investment, collect them because you enjoy it, not because it's part of your retirement strategy.

Now, being an all round nice guy and also the smartest guy on the Interwebs, I'm going to finish by lightening the gloom a little. It IS possible to make a profit from buying coins in very exceptional circumstances where there is an increased in demand and hence price due to factors outside of coin collecting. Even better, you can predict these events! Let me give you an example - 2014 will see the 100th anniversary of the First World war which will lead to an increase in demand for all things related to that most momentous of events, including coins. Actually, particularly coins. The gun used to assassinate the Archduke Ferdinand is out of our price range, militaria items have always been expensive so people will look to coins as the most accessable items they can buy to meet the urge to own something, a tangible link. Investment tip: any coins from 1914-1918 from the major participants, especially occupation issues, Austro Hungarian coins. This will have a ripple effect on prices of Notgeld/Kreigsgeld, Weimar & 3rd Reich coins and even the humble Vichy Francs.

Another less concrete example - Churchill Crowns are probably the most undervalued coins in the world, Churchill however is probably the most admired Englishman in the world (shaddup Matt) especially in the US. A major Hollywood blockbuster about the man would put prices through the roof for a while. Why not buy a dozen or so and speculate? It makes more sense than "investing" in junk silver.

If you make a killing, I accept PayPal or beer.

wow !!! thank you, an that is one thing i dont understand why churchills coin is worth very much???  

Quote: james wolfe wow !!! thank you, an that is one thing i dont understand why churchills coin is worth very much???

That's a good question my fellow Floridian.  It has everything a valuable coin should have, nice design, mintage of less than 10 million, it's an official issue from one of the most popularly collected countries, it marks a truly significant event - the death of one of the world's most admired statesmen, high denomination**..... and it's big and shiny. Yet you can't give them away!

The answer (or at least my version) is an interesting snapshot of how the coin market works.

First of all, the Churchill Crown was never really circulated. Unlike say the JFK half dollars, even the bicentennial ones, I never personally saw one being spent even though they were legal tender. It's strange to consider that a well circulated and worn VG Churchill would actually be a rarity, I've never seen one less than EF.

The young Master Nightingale Esq. was given three of them way back then, one by my mother and one each from my grannies, with the advice, "Keep a hold of these, one day they will be worth a lot of money".  I did, they aren't, but I keep them for sentimental reasons. I reckon that every other kid in the country got the same coins with the same advice. So practically the entire mintage remains in very high grades.

The mintage of 9.6 million seems small by 2012 standards but it was more than the three previous crown issues combined which means that everyone who wants one either has one or can find one without difficulty.

However, I still stand by my assertion that this coin is a good bet for those with a taste for speculating. Allowing for the numbers which have been lost, damaged, made into jewelry etc. there may be less than 5 million still circulating in the coin market, enough to satisfy the demands of an unfashionable hobby but not enough to accomodate the needs of a major upswing in public interest.

Alternatively, it's only a matter of time before some enterprising speculator decides to manipulate coin prices. 5 million coins at say $2 each... you could buy up the entire issue for a measly 10 million bucks. I'm sure that the likes of the Bros. Hunt and Dr Evil are already considering this as I write.  I might even try it myself if someone will lend me the cash.



** In 1965 five shillings would be enough to get outrageously drunk, a pack of Player's No. 6's, a fish and chip supper and still leave you enough for a taxi home or a bail bond, depending on your mood.

I was suprised to hear how few were minted ive never gone out to buy one and rarely buy bulk lots but some how i poses two of the blasted things (ive managed to dispose of a few others aswell) it is not uncomon to see a large pot full of them on a dealers stand selling for 50p each i think this give an artificial impression that their are tens of millions of the things and puts people of buying them as it did me. Im not sure people would want to turn them into jewlery who would want to wear an image of a fat cleftpaleted wrinkly bold old man. (that was a little bit disrespectfull i know espeacialy as if it wasnt for him id be speaking German or worse)

I believe silver is still a very sound investment. I buy mailly Canada maple leafs and United States Eagles. always 1 ounce silver. I think 2012 will be a good yoear for silver with a possible return of more than 30%.

Great comments/replies here, definite food for thought, thanks folks!

As for me, I buy different coins for different reasons, mostly to collect, some I think have long term potential. But, I always try to remember that a lot of the coins that I buy are only going to be worth what someone is willing to pay for them, like a lot of my football cards! ;)

I have been buying certain years of 1958 (Wheat back) Lincoln Cents and older, that are fairly low in mintage, but can be bought for way cheaper by the roll in BU condition than older ultra low mintage cents (1955-S is a great example!), in hopes that 10-20 years from now, I can sell them off one at a time and triple my money, or better put, protect my dollars buying power really. I am fairly certain that if I can buy $1 worth of coins now, and sell them for $3 in 10-20 years, I have accomplished my objective. If I make even more, that's a bonus! :)

On a last note, I am doing the same with Copper. I am not going to stop buying Silver, but to my knowledge, Copper isn't "manipulated" ( yet.......) and so I hope to buy up Copper in specific types of scrap (bar stock is my favorite!) and resell it later having lost nothing in the "buying power" of my investment. Protecting the dollar is my sole objective, profit is a bonus  

Quote: pnightingaleI don't mean that it is impossible to turn a profit on coins by careful buying and selling. Buy high and sell low, in simple terms. That however is trading rather than investing. Investing implies a buy and hold strategy  

QuoteThis is a good point, along with radrick007's
 However pnightingale, I am afraid that silver coins will still be high because all those Jerks are actually melting them down.  

  One thing that you have to realize about "investments" like antiques, art, books, pottery, COINS, or whatever collectables is that they go in natural fluctuations.  Coins just are not in right now, but they will be again some day.

Yes and No.

Numismatic coins are affected by supply and demand rather than speculative interest as is the case with bullion. As you say, it's subject to fluctuations driven by scarcity. Scarcity is often misunderstood by coin collectors to be an absolute term, it isn't and I often find myself falling for the same trap. Look at some of the Island issues, the mintage is absurdly low yet because they are not attractive to collectors there is little demand.

With regard to the melting down of silver coins I don't think this is an issue. During the 1970's boom there was a huge smelting of pre 1947 silver coins in the UK but the key difference then was that they were very common in circulation and in worn condition had no value to collectors. Now, because of the earlier melting even coins in humble grades are viewed as collection worthy.

I can't prove it, I have nothing but anecdotal evidence but I believe that "investors" are buying silver coins and holding them in their current form. Coins, unlike say silver teapots are a perfect medium. Their weight and silver content are already known and their relatively small size makes it easy to sell all or part. Well I guess you could snap the handle off the teapot and sell that but you know what I mean.

Secondly silver coins have both a numismatic value and an intrinsic value. While the investor is only concerned with the latter they are aware of the former. Even if the price of silver dropped to $1 per ounce (please baby Jesus) their coins would still retain the value as a collectors piece. Why melt away what amounts to free insurance?

It doesn't make sense to me but then the antics of the melt crowd are beyond my comprehension so I may be very wrong. Buying up silver coins with a view to flipping them next month when the price gets to $100 is right up there with phrenology, freudianism, crop circles and the flat earth society.

(Apologies to any bump feeling psychos travelling the flat earth to examine crop circles)

When I started buying silver in large quantities in 2003 for between $4.50 and $4.75 per ounce, fellow investors thought I was crazy and they were doing all the laughtng especially the day that I used all my severance pay to purchase 5000 ounces of silver. When I sold 50% of that in 2011 for over $40.00 an ounce, I was doing all the laughting .. an 800% to 900% return on my investment in just 8 years. Even at $30.00 an ounce I am still happy. However, this is not the time to sell. In fact, I purchasesd during December 2011 and this month I could sell the same silver for 10% over my purchase price ... not a bad return for 30 days.

Quote: pnightingaleWith regard to the melting down of silver coins I don't think this is an issue. During the 1970's boom there was a huge smelting of pre 1947 silver coins in the UK but the key difference then was that they were very common in circulation and in worn condition had no value to collectors. Now, because of the earlier melting even coins in humble grades are viewed as collection worthy.

 Well lets hope some hold them like you say, but all those "We Buy Gold" places are melting everything they touch.  

  As far as fluctuations, what I mean is the hobby, not speculation, value, or supply and demand. Coins are not "in" right now, but in 10 more years the hobby will pick up like a flood.  That's what happens to antiques, they can change value every 10-20 years. Things drop and go back up, and drop and go back up, and so on. Its just like clothing stile, who would have ever thought the 80s would come back in stile, but they are. Just wait, coins will come into a fad.  That is if TV doesn't rot all the kids brains out.

Anyone else noticed Matt Probert's no longer a member here?

Quote: jonathansouthAnyone else noticed Matt Probert's no longer a member here?

https://en.numista.com/forum/topic6361.html
https://en.numista.com/forum/topic4583.html

 I guess that is who the first topic is about, and there are a few replies at the end of the second one.

How sad.

Quote: jonathansouthAnyone else noticed Matt Probert's no longer a member here?

 why did he go??? i thought matt was a great guy.he will be missed  

His knowledge will indeed be missed, along with his, sometimes critical opinion.
He kept the forum interesting, for sure.

Quote: ctuckerHis knowledge will indeed be missed, along with his, sometimes critical opinion.
He kept the forum interesting, for sure.

The problem is that rather than debate an issue or opinion, some members make it personal. On a couple of occasions I have considered unsubscribing. Do not attack the person ... debate the issue.

That is a problem, I agree. Sometimes people go overboard with the replies.
I try to intervene when I see it, but its already out there.
I hate to lose members because of hateful comments. Even the nice guys have their days, an I would hope that noone takes a bad comment personal.
Matt, himself, often had harsh comments about the capitalistic system in the US, but I brushed it off as teasing, as I hope it was intended.

i agree with you ctucker,i dont let these things get me mad

Quote: ctuckerThat is a problem, I agree. Sometimes people go overboard with the replies.
I try to intervene when I see it, but its already out there.
I hate to lose members because of hateful comments. Even the nice guys have their days, an I would hope that noone takes a bad comment personal.
Matt, himself, often had harsh comments about the capitalistic system in the US, but I brushed it off as teasing, as I hope it was intended.

Yes you are both right. We have to look in the mirror sometimes. If we cannot take nagativity well, we should not give it. ..... Do unto others as you would have them do unto you .....

Quote: coinsoldier

Quote: ctuckerHis knowledge will indeed be missed, along with his, sometimes critical opinion.
He kept the forum interesting, for sure.

The problem is that rather than debate an issue or opinion, some members make it personal. On a couple of occasions I have considered unsubscribing. Do not attack the person ... debate the issue.

I think you have pretty much hit the nail on the head. I was quite concerned when I learnt that he had left the community and I sent him a personal email. So as not to betray his confidence I will just paraphrase what he told me about his reasons for leaving. Part of the reason was what you have already mentioned about personal attacks over the forum and the site admin's poor response to such attacks. The other contributing factor was the ever-increasing presence of scammers preying on the naive, about which I tend to share his concerns. For those of us old enough and experienced enough we would hope to be able to spot a fraud without too much trouble. But what about those just starting out, youngsters who have perhaps just joined Numista - who is going to look after and protect them? As this website grows ever larger, it must be getting harder to patrol and maintain security. Perhaps the site admin should be putting checks and controls in place to maybe weed out some of the scamming riff-raff. I don't know what the answer is but I am worried that if Numista continues in this vein then we will start losing more honest, knowledgeable and, frankly, interesting members and the website will be that much worse off as a result.

well spoken redrick007,i agree with you 100%, do you think matt  will ever come back???

I can't disagree with you. I have the same fears and no suggestions to help, except for us members taking an active role to teach those that would be the prey. New collectors will make mistake. I'll tell y'all about my $17 1977 crown one day or the $6 1899 half penny in AG.
It is as much on the shoulders of the members as it is the admin, to keep peace and weed out the bad apples where and when we can.
Having said all that, I will miss Matts voice on this forum as well as the occational swap, as I'm sure will others

Interesting thoughts and opinions... Out of interest how many admins exist on this site? Given there's 13,000 registered members (not sure how many are active) perhaps there should be a higher ratio of forum moderaters?

Ctucker is right, it's on all of our shoulders to maintain the integrity of the site. There's a "Numista Website" section on the forum, that should be where we voice our ideas to protect new-comers. I'm keen on keeping the community spirit to this website.

I, like radrick007, sent Matt a letter and radrick007's paraphrasing is pretty much the same reply as I got.
I am hoping to join the Numista team and have put my ideas forward. Because, I am not that knowledgeabe on the coin front; I've asked to deal with new comers...welcoming to the site etc.

I think we can all learn a lesson from Probert...and we definitely need to start reporting inappropriate posts...perhaps the website needs to have a link to Numista team members that moderate forum etc.

The forum policy is all there in black and white. We need to uphold it.

Quote: jonathansouthOut of interest how many admins exist on this site?

At the bottom of this page is a link  More about Numista  and the Admin. team are named on there.