Investment In Rare Coins - Is It A Dirty Word?

For many collectors, the term investment is something of a dirty word - the very thought of their passion for history, art or self-expression being commercialized hits them in the gut as being revolting.

How can a price be put on good taste?

How can we even contemplate a personal memory as being more or less valuable than another?

Although these sentiments are indeed understandable and perhaps even honorable, the fact remains that money does indeed make the world go round, or at least it plays a fundamental role in life in an advanced Western society in the 21st century.

There are others though that sagely opine that certain sections of the numismatic world are no longer the domain of the collector, but are now the sole province of the investor - this is principally due to the (relatively large) number of zeroes in the prices of the items being referred to.

The question for some then becomes - is it possible to invest in rare coins and notes and make money?

The short answer is an unequivocal yes.

The long answer is a little more qualified!

The Cambridge dictionary describes investment as being "the act of putting money, effort, time, etc. into something to make a profit or get an advantage, or the money, effort, time, etc. used to do this."

I love this definition of the word - notice how there are several items that can be invested - not just money alone, but time and effort are also listed (among other factors presumably listed under "etc" that will evidently remain unidentified at present.

This definition really is fundamental to the way that I view successful investment in rare coins and banknotes - if you choose to invest less time and effort than money, your capital stands to be at a level of risk higher than that which you truly appreciate.

Invest less money than time and effort, and you may well be suffering paralysis by analysis.

So let's use just one example to see the kind of money that can be made when a collector / investor takes a well considered position in the Australian numismatic market. For the sake of this exercise, I'm going to look at how one coin in our current inventory has done over the past 5 years - an Extremely Fine 1923 halfpenny.

If you're not already familiar with it - this is Australia's second rarest Commonwealth (pre-decimal) coin, it's tough to get in any condition, and is particularly rare in premium condition.

It's been an object of desire for many an Australian coin collector over the past four decades at least, and is likely to remain in that position for many decades to come.

My auction statistics show that two similar coins sold back in 2004 (five years ago as this is written) for around $10,500. If we take the current market value of $19,500 as the end point for our analysis, it works out that this coin has appreciated at a rate of 13.22% compound per annum for the past 5 years. Those among us with a fair degree of financial savvy know that this figure needs some qualification, however I firmly believe that even after running that 13.22% figure through the mill, the benefits that would be gained from the money, time and effort spent to obtain one of those coins back in 2004 would be well worth it, even if only for financial reasons.

Why Rare Coins and or Notes?

Although a wide range of tangible assets and collectibles are traded and invested in (fine art, sports-cars, wine, antique clocks and furniture, comics, stamps, porcelain, silverware to name just a few), I strongly believe that coins are far more frequently acquired for reasons relating to profit, value and resale than any other tangible asset.

The purposes for which coins are produced are as a medium of exchange and as a store of value, and these functions are the very reason why collecting coins is popular across cultures, generations and societies. It is, in fact impossible to think of or relate to a coin or note without these concepts being present in one way or another!

These facts alone go a long way to explaining how notions relating to trade and investment can be foremost in the mind of a collector when they acquire a rare coin or note. Other characteristics inherent in both coins and notes also contribute to them being easily traded:

  • Far more than any other tangible asset, coins and notes are extremely portable. In this day and age of electronic business and the global economy, coins and notes are just easily transferred between continents as they are between the home and the office. This simplicity in transportation is just one more reason why so many buyers and sellers find it convenient to sell their coins directly via the internet. A great deal of value can be sent through the post or via a courier service without drawing unwanted attention – try doing that with some fine china or a large artwork!

  • Coins also offer little in the way of storage issues - large amounts of wealth can be easily stored in a discreet safe at the home or office. Other tangible assets such as fine wine or antique furniture can pose far greater challenges when it comes to safekeeping and security.

  • Historic, beautiful and rare coins can still be extremely affordable relative to other collectables or tangible assets – no other area offers the same opportunity for profit with such little expenditure. Less than $100 is required to get started in several areas that offer the keen student the potential to make meaningful profits right from the outset of their trading career.

  • It's something of a contradiction that most rare coins are in fact relatively interchangeable or homogenous. Although some of our most historic coins are either completely unique or there is only one example available to the collector market, when it comes to the market values of most rare coins, collectors accept that one example of a rare coin in a certain degree of preservation is reasonably equivalent to another example of the same coin in comparable condition. This homogeneity means that rare coins are relatively easily traded when compared to other collectables that have a higher number of unique characteristics.

If all of the above has whetted your appetite for more information on how you might be able to learn more about being able to make money out of investing in rare coins and notes, You might like to look over our ebook titled "Trading Coins for Wealth".