I’ve recently started buying and collecting coins for my future grandchildren (have no grandchildren yet). But would it also be a good idea to buy coins as a not-so-long-term investment? I mean, buying and selling a year later or so for a profit and reinvesting (for my retirement)?
I’m interested in American coins, mint state. Gold and silver mostly, but also Legacy and anniversary coins (less than 250,000 production).
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I have been collecting for many years and have learned a few things along the way.
First, you have to factor in the dealer markup. If you buy a coin today, and try to sell it tomorrow, you’ll lose at least 20% unless it is a very rare and desirable coin, or unless the coin’s value is largely based on the metal content (gold, silver, platinum, etc.)
Next, you did not say what kinds of coins you are buying. Many coins just do not appreciate in value very much. There are many, many coins which sell for less today than they did in the late 1980′s which was the historical peak of the coin market. Knowing what kinds of coins you are buying is important – can you edit your question to include that information?
Also, even the most experienced and skilled collectors would tell you not to use coins as an investment. There is no guarantee that anyone will want to buy coins in the future, no guarantee that prices will go up.
One more factor is that if you pay too much when you buy, even if prices go up you could still lose money when you sell. Let’s say a coin can be bought for $100 today if you know the best place to buy. Your dealer sells you the coin for $150 and you don’t realize you could find it elsewhere for less. Five years later, the coin has increased in value to a retail value of $180 and you want to sell. The dealer expects to make a profit, so he/she offers you a price that is 20% less than his $180 selling price – which comes to $144 and a loss of $6 even though the coin has risen in price. So even if prices go up, if you pay too much when you buy, you might not benefit.
There have been some coins recently sold by the US Mint which have done very well nearly immediately after they were released, but there’s no way to count on it. I know a lot of smart collectors who bought many of the recent Jefferson spouse gold coin fully expecting to make a killing, but the prices have not gone up and they are stuck with them.
I would say you will be very disappointed if you try to sell coins a year after you bought them expecting to make a profit. And I urge you strongly to not invest a lot of money in coins for your future grandchildren or for your retirement unless and until you educate yourself.
I very much enjoy coin collecting as a hobby, and I have met a lot of great people through collecting, but it is not an appropriate investment because the risks are high. If I eventually sell my collection and only get back what I paid for them, I will be happy. It would be great to make a huge profit, but I know enough to understand that is not a sure thing.