Archive

Posts Tagged ‘Coin Investment’

How to Invest in Coins: Three Key Steps to Coin Investment for Beginners

November 30th, 2012 No comments

If you are like most investors, at some point you are going to become attracted to, or at least intrigued by, the investment potential of coins. Rare coins have consistently been a great investment vehicle for the simple fact that there will always be a greater demand than there is a supply in the market place. That is the fundamental nature of rarity.

Step 1: Understand the Basics

The first thing to understand is that it is all about high quality and rarity. In order for it to have true investment potential, the coin has to be of the highest quality and/or it has to be extremely rare, preferably both. If you have to choose between the two, it is good to remember that circulated rare coins will typically command a higher price than non-rare uncirculated coins. In regards to rarity, it’s all about how many were minted, or how many still exist. An extreme rarity is a coin that came from a very limited production. Try for rarity first and then if you don’t have access to rarity, try for the highest possible quality. High quality means that the coin has remained in brand new (uncirculated) condition. High-quality rare coins are, of course, the most valuable.

Step 2: Find an Expert You Can Trust

Successful coin investing requires a high level of skill and experience. The selection process involves a thorough understanding of rarity and quality as well as sufficient market experience to be able to predict future demand. Knowing when to buy and sell is also vital to your success. This may seem a little intimidating to a beginning investor but thankfully there is an easy solution to this problem. Instead of having to spend years in the marketplace and countless hours studying, simply align yourself with a coin expert from a reputable company. A professional coin dealer with decades of market experience will be adept at choosing the coins that are the most likely to appreciate. With this relationship in place you will be able to build your coin collection and remove a lot of the risk so that you can make more informed decisions.

Step 3: Buy and Hold

It is generally recommended that you wait at least five to ten years to sell a coin after acquiring it. Actively trading coins is usually not the best strategy because you’ll probably only get minimal appreciation in the first 2 years of an investment. Also, appreciation is a lot more unpredictable in the first few years, more predictable over 5 years and very, very predictable over 10. The 5 to 10 year period is the optimum period to hold a coin. Of course, as with anything else, there are exceptions to the rule. There are times when the optimum capital appreciation might occur in just two or three years and it is a good time to sell a particular coin or group of coins. If you have a good working relationship with an expert broker, they will likely advise you when these conditions occur. Typically the longer a coin is held, the more valuable it becomes. If you look at coins over 40 years, the average rare coin has increased at a compound growth rate of 16.1%.  That’s a tremendous capital appreciation.

So with these kinds of consistent returns, it certainly seems to make sense to include rare coins as a part of your investment portfolio. You can start with as little as $1,000, although most experts would agree that it is ideal to start in the $50,000 range if feasible. Regardless of where you are starting, the important thing is to get started.

Buying Bullion Bars or Coins: Which is the Better Investment?

November 8th, 2012 No comments

Many investors have decided that it is safer to have precious metal in hand than it is to invest in precious metals Exchange Traded Funds (ETFs). Granted, the cheapest and most convenient way to invest in and trade with gold and silver is ETFs, but they also come with more long-term risks. Risks such as, but not limited to, counter party risk, which means that the precious metal is not actually held by the ETF provider. It’s typically held by a large bank and if the bank goes bust, your investment could disappear as well.

Besides, how do you know they’re actually holding the precious metals that they claim to be holding? Along with this are the U.S. Commodity Futures Trading Commission and the Gold Anti-Trust Action Committee that reported that the actual physical gold that exists globally above ground is only 1% of the ‘paper gold’ that is being traded.

The Shiny Stuff

Buying physical gold and silver is undoubtedly more expensive than purchasing ETFs. First you have the dealer’s premium that you will incur when you buy it. You will also have to factor in delivery, storage and even insurance costs. Then when you sell, there is typically a dealer fee as well. Of course, buying and selling gold and silver is also not without risks either.  Gold and silver prices could drop through the floor resulting in a loss on an asset that may not be easy to sell. However, when you look at current market conditions and global economic trends, investing in physical precious metals definitely warrants close consideration. So what form of precious metal do you buy? Bullion and coins each have their own merits and drawbacks and both should be assessed as to how they fit your unique needs and investment strategy.

Coins

Coins can be quite elaborate and attractive and easy to purchase in small amounts. Since they are something with which most of us are familiar, they can also be a little less intimidating than bullion, at least at first. Some coins are rare and collectible which can add even more complexity to the investment. It should be noted that the added value of being a collectible is often in the eye of the beholder. Collectible and antique coins are very specialised markets and should probably be avoided unless you really know what you are doing. Collecting coins can be fun and rewarding but for true investors, most would agree that bullion is a wiser choice.

Bullion

Precious metal investors focus purely on the metal value rather than getting caught up in collectible values. Bullion is easy to sell, hard to fake, and is typically more pure than coinage and the premium is generally lower as well. For the serious investor, gold bars are the simplest and most efficient way to invest in precious metals. Larger bars are generally available for the lowest premiums over their intrinsic metal value. The trade-off is that they are not quite as flexible as smaller bullion portions when it comes time to sell.

Even though most investors would agree that bullion bars make the most sense, like most things, investment strategy is an individual pursuit and only you can determine what’s best for you.