Though economic uncertainty has dogged the traditional stock market for the past half-decade, the performance of stocks and the question marks hanging over the global economy have allowed alternative types of investments to flourish. Consumers who once had a choice only between stocks and bonds can now choose things like gold bullion, precious metals, or even rare coins, in order to diversify their portfolio and insulate themselves from the wild swings that have become characteristic of U.S. stock market indices and international counterparts.
Among all of the alternative investments available to consumers in the 21st century, though, there is perhaps none as unique and stable as the rare coin industry. Long considered merely a hobby of those who had an interest in coins or collecting them, the rare coin industry has become a real hub of activity in recent years. That investment activity is led by a few key characteristics, including the relative stability of coin prices and values while other investments seem perpetually in decline. Rare coins are also made with bullion in many cases, combining the two most popular alternative investment methods in a single, cohesive strategy.
Getting started with rare coins is actually very easy, but prospective investors should at least read through a primer of basic industry nuances, the methods of investing, and how to safeguard any strategy against scams and exploitation. This knowledge will set the stage for a dynamic transformation of any investment portfolio into one that is less risky, more stable, and can earn returns in a more healthy manner than many other mechanisms.
How to Get Rare Coins: It’s a Bit More Involved than Stocks
The bizarre thing about stocks is that they aren’t actually physical things, and they cannot be physically possessed or stored away for safekeeping. The intangible nature of stocks makes them easy to secure, but it also makes them very easy to lose a significant amount of money on after an initial investment. Investing in rare coins takes a bit more legwork, generally because investors will have to actually get their hands on the rare coins in the first place so that they can hang onto them and use their value proactively.
This quirk of the industry has led to the rise in online companies selling rare coins to interested consumers. Currently, online dealers represent the most easily accessible way to invest in rare coins, as their doors are always open and purchases can be made around the clock. Better yet, these online investment resources have plenty of coins available with no lack of storage space. This leads to quicker delivery of coins and a better selection overall.
Acquiring rare coins can be done at these online dealers, like the respected Monaco Rare Coins, or through offline dealers and collectors who are looking to trade. In this way, investing in rare coins is actually far more interactive, social, and personal, than simply clicking through a series of stocks and bonds.
A Look at How Rare Coin Investing is Currently Regulated
The unique nature of the rare coin industry means that dedicated investors will be dealing more often with smaller dealers, local collectors, and medium-sized online businesses. That’s certainly not how traditional investments are performed, since customers there are usually funneled to the largest investment house near them, either online or off, and treated like a number by a company that is extensively regulated by the government. Rare coin investing is a bit more under the radar, both in practical terms and in terms of regulation.
Instead of being overseen by major government agencies and legislative committees, the industry currently answers to two major trade industry bodies that ensure the trustworthiness and value of dealers. The largest of these bodies is the American Numismatic Association. The group is charged with overseeing thousands of dealers who must all apply for membership with the organization and be approved based on their business practices, size, and other factors.
The second-largest regulatory body is easily the most stringent. Known as the Professional Numismatic Guild, the organization has strict requirements for dealer membership that require those dealers to be in business for several years beforehand. Business practices and financial information is all reviewed as a part of the membership application process, and only those companies with the best record will be accepted.
Both groups are quite strict with membership, and consumers looking to invest in rare coins should use either organization’s seal as an indicator of good business practices. These organizations simply wouldn’t lend their seal of approval to a scam company or one that wasn’t exactly in line with industry standards.
The Justification: What is the Value of Investing in Rare Coins, Anyway?
The rare coin industry benefits from two major factors that simply do not affect stocks or other traditional methods of investing money. The first of these is the fact that a vast majority of rare coins are created using gold bullion, silver, platinum, or palladium, depending on their age and origination. Bullion, as most astute investors might know, has skyrocketed in value in recent years. Though its upward trend has leveled off somewhat throughout 2012 and 2013, it still remains a safe bet and it continues to become more expensive. That bodes well for coins, as their resale value increases as their materials become more valuable.
Rare coins are also bolstered by their overall historic value. The word “rare” itself implies that these coins can’t simply be found at any traditional bank, mint, or collector. Instead, they’re hard to find and out of production. As time goes on, and they become even older and even more rare, their value will increase. While this is good for the coin’s overall value, it’s also a good way to blunt the effect of a decrease in the value of bullion. These two factors work together to give coins a stable value, or one that grows gradually. Most investors will agree that steady, gradual growth is preferable to wild swings in both directions.
What to Avoid: Don’t Fall for the Bullion Trick
As mentioned earlier, rare coins are almost always minted with some amount of bullion. This bullion helps to maximize their value as their historical nature deepens over time. Some rare coin investment sites, though, don’t have access to the most historical rare coins. Instead, they offer consumers a few rare coins and many others that are simply made of gold bullion. They imply that bullion is rare, and so is the coin. That’s not true.
Many bullion coins are still being created today, including coins like the American Eagle and Canada’s Maple Leaf coins. While these coins are not cheap, and bullion is a good investment, coins like this are still in active production and they’re not too hard to find. Their value will be more directly tied to the value of bullion, with historical implications playing virtually no role in their worth. That means if gold goes down, the coins go down with it. It’s simply unacceptable, and it’s the number one indicator that a given dealer is engaging in scams or sketchy business practices.
Take Time to Research Rare Coins and Compare Dealers
There are several things that can be researched about alleged rare coins to verify whether or not they’re the real deal. Each aspect of a coin is generally objective, and the stated value of a coin should be quite similar across multiple, reputable dealers. New investors should pay attention to a few key things:
The coin’s “grade” is used to determine the condition of the coin itself as well as its use in an investment portfolio. Investment firms use the coins’ grade to determine things like liquidity, the rarity of the coin, and the interest factor of the coin. These things will help determine how much the coin can be sold for. They also serve as a key way to predict its future growth as an investment tool.
2. Future Appreciation
The coin’s grade is a key way to determine this factor, but some other pieces of information are used as well. Reputable investment companies will use future appreciation indexes to show how a coin will grow in the weeks, months, and years following its purchase. If the future appreciation is dynamic and grows too quickly, it’s probably a case of “too good to be true.” Be wary of companies that over-promise their coin’s future worth without having any method of verifying that prediction.
Astute Shopping and Researching is the Key to Financial Success
Investors considering rare coins as an alternative to their traditional investments should be strongly committed to research. Just as it’s necessary to research a particular stock’s past performance and future growth, rare coins must be assessed based on their grade, overall value, future appreciation, and other factors. With careful research before buying, as well as a firm understanding about what makes a rare coin dealer trustworthy, customers will find themselves able to build a broad and diverse portfolio of coins that will greatly increase in value in the future.