Popular coin investment books discuss coins as a long term investment.
In the 1991 edition of his classic investment book, High Profits
from Rare Coin Investing, Q. David Bowers wrote, “Consider coins to be
a long-term investment. While individual factors vary, I suggest a
period of five to 10 years to be a good objective and 10 to 20 years
to be even better; the longer the time, the greater the returns have
been on a historical basis.” That logic is perhaps even more true 20
The coin buying and selling landscape has changed in major ways in
the past two decades. With the current democratization of information,
auction results have become incredibly easy to search.
It’s much harder for the market to “forget” a coin that appeared
at public auction. If a buyer is looking for a coin at auction, he or
she can see what that coin — and similar coins — have sold for in the
past and use that information to make smart buying decisions.
The market’s memory is longer and more accessible than ever. As
Bowers wrote in 1991, a factor supporting coins as a solid investment
is that coin information is readily available.
“Generally, coins are easy to identify and classify. Mintage
figures, sales records, and price guides are available to help you
with your investment decisions — aiding you in the same way that
earnings records, dividend information, industry projections, and
other information is of use in the stock market,” he wrote.
Mystique has long accompanied coins that are from old time
collections. When offered for sale, they’re presented as rare and
fresh buying opportunities.
Frequent and repeat appearances of the same coin can create an
illusion that a coin is more common than it actually is. John
Kraljevich noted this in his Sept. 24 “Colonial Americana” column
where he defined “market velocity” — how often a piece becomes
available for purchase. A coin can be rare, yet trade relatively frequently.
When one takes inflation into account, even modest price
appreciation may not be as impressive as it appears. Take for example
a 1932 Picasso painting “Still Life with Tulips” that realized $28.6
million at Christie’s in 2000. Re-offered two weeks ago in New York at
Sotheby’s, it sold for $41.5 million. As Souren Melikian, writing in
the New York Times, pointed out, once charges are deducted for both
buyer and seller, combined with storage costs and the eroded buying
power of the dollar, the return is much less impressive. Further, the
prior sale set a benchmark that established relative value.
When people know what an object last sold for, they have to
convince themselves that it may be worth more the second time around. ■