US Coins

What Birkin bags and rare coins have in common

The Investment Column from the March 7, 2016, issue of Coin World:

What is an investment?

A recent research study compared the S&P 500 stock index, gold and Hermes Birkin bags, a high-status and high-priced bag that’s coveted as a status symbol by nearly all women of means, ranging from television’s Real Housewives and Kardashians to high-powered businesswomen and socialites.

Between 1980 and 2015, the study noted that the S&P 500 produced a real return average of 8.65 percent. Gold was less successful as an investment, with a real return average of -1.5 percent. Hermes Birkin handbags showed an average annual increase in value of 14.2 percent, with the study noting that, unlike the S&P 500 and gold markets, the value of Hermes Birkin handbags has never fluctuated downwards and has steadily and consistently increased.

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Among the luxury accessories market, Hermes handbags are well-known to hold their value more than other comparably situated luxury handbags. Those hoping to buy one are often subjected to a waitlist at Hermes stores that can be as long as six years, and on the secondary market, bags can sell for more than their original price. 

In 2015, Heritage sold a matte white Himalayan Nilo crocodile Birkin bag with palladium hardware for $87,500, describing it as “a holy grail handbag” that “certainly makes a statement of opulence, excellence, and ultimate luxury.”

Calculating a standard rate of rare coin investments between 1980 and 2015 is trickier because of shifting grading standards. The widespread adoption of and evolution in third-party coin grading from the mid-1980s to today has meant that a coin that would have graded Mint State 65 in 1980 may not grade that way at today’s standards. This makes useful year-to-year evaluations of rare coin performance of potentially limited effectiveness.

As the Federal Trade Commission has posted in a pamphlet called Investing in Collectible Coins, “The difference of one grade in the same coin can mean the loss or gain of thousands of dollars in value. Subjectivity in grading means there is real inherent risk in coin investing.” The FTC further reminds those looking to invest in coins, “Expect to hold your investment for at least 10 years before possibly realizing a profit.”

So what do coins have in common with Birkins? Those who purchased Birkin bags 30 years ago likely didn’t think about the long-term investment potential. They purchased them because they liked them and enjoyed them. A similar attitude can make coin investing rewarding.

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