Author Topic: Coin Collecting  (Read 1561 times)

Honest Abe

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Coin Collecting
« on: November 24, 2012, 07:40:04 AM »
I've been searching for a mustashian hobby and coin collecting seems to fit the bill. Anyone have any experience or thoughts on this?

Peter

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Re: Coin Collecting
« Reply #1 on: November 24, 2012, 08:37:49 AM »
I guess you mean collecting common coins found in your change? I love coin collecting and have a sizeable stash of old, shiny, or rare(ish) coins. Any coin collecting that isn't just rummaging through change though I would call the OPPOSITE of mustachian. As you're giving away real money for much less of some other money that may or may not be valuable to certain people.

Even with collecting money, there's an opportunity cost. I have about $500 worth of coins and $500 of bills. I've had this in my home for 15 years. If I invested it instead it'd be worth 3000 now...

Still, it's a great hobby :)

iamlindoro

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Re: Coin Collecting
« Reply #2 on: November 24, 2012, 09:56:49 AM »
As the previous poster sort of alluded to, the appreciation of rare coins (or baseball cards, or comic books, or action figures, or...) will invariably fall far below investing the same amount in an index fund and reinvesting all dividends.  In fact, I'd wager that in most cases the appreciation won't even keep up with inflation, meaning it is actually losing you money every single year you don't liquidate a collection like this and turn it into a more worthwhile investment.  It actually strikes me as pretty *un*mustachian.

KingCoin

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Re: Coin Collecting
« Reply #3 on: November 25, 2012, 11:02:44 AM »
Every once in awhile I get the urge to collect things, but then I punch myself in the face instead.

I think we all have a natural hoarding instinct, and "collections" are a way of channeling this instinct in a way that lends itself to all sort of spurious justifications. Maybe you consider the collection a sound "investment". Maybe you consider yourself some sort of historical steward. The truth is, rare coins will massively underperform the S&P as an investment. Furthermore, while there's certainly a body of knowledge to acquire and some interesting historical background, coin collection isn't very mentally stimulating or challenging. Do you really feel like amassing a bunch of metal disks is going to increase your happiness or quality of life? The joy will be in the acquisition and that joy will be short lived. In this way, collecting shares many of the attributes of consumerism in general.

Why not choose a skill based hobby instead like photography, piano, or wood/metal working? These hobbies can offer a lifetime of challenges, benefit others, result in you being held in higher esteem by friends and family, and can even be turned into money making opportunities after you've achieved a certain level of proficiency. $1500 spent judiciously will take you far in any of the above examples. 

cdngb

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Re: Coin Collecting
« Reply #4 on: November 26, 2012, 12:55:10 PM »
There is a difference in collecting coins and investing in coins.  I agree with others who indicated that saving coins that you find in your change is not a great investment idea. 

However if you educate yourself and/or find a dealer that is trustworthy you can invest in coins and bills with a reasonable expectation of profit.  Rarity and condition will indicate the price and investment worthiness.  This should be considered a long term investment.
 
Another simple idea is to search out old silver coins that can be found at reasonable prices at garage sales and then sold for their silver content, ie. approx. fifteen to twenty times the face amount depending on the current price of silver.  This is not coin collecting but trading on silver just like MMM discussed with silver flatware.

KingCoin

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Re: Coin Collecting
« Reply #5 on: November 26, 2012, 06:45:23 PM »
However if you educate yourself and/or find a dealer that is trustworthy you can invest in coins and bills with a reasonable expectation of profit.  Rarity and condition will indicate the price and investment worthiness.  This should be considered a long term investment.

Why to you think that rare coins will outperform real estate or stock investments? Rare coins are a non-productive asset, so in 20 years that rare coin will still just be a rare coin, having generated no dividends, growth, or rental income. Beyond their nominal value or the value of their metal, the price is wholly predicated upon what  someone is willing to pay for it. If the real returns of coins was significantly positive in the long run, their value would become astronomical (and eventually near infinite).  The only reason that a rare coin would outperform inflation is if enthusiasm for coin collecting grows (i.e. you find a greater fool to sell it to). Just as likely (and perhaps more likely given the demographics of coin collectors) interest in coins might wane. Investing in anything that hinges on the greater fool theory as an exit strategy is an extremely dubious proposition. Just ask the hordes of baseball card collectors from the early 90s.

Rummaging through coins in search of Indian Head Pennies is harmless enough, and coins are probably a better "investment" than most commercial collectibles like Thomas Kincade painting and Hummel Figurines, but spending a ton of time and money on a coin collection in search of profit is much more likely than not going to end in tears. I suspect that the real money is made by dealers buying collections in bulk from windows and orphans and selling them at retail to collectors who are usually left holding the bag when the bottom falls out.

cdngb

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Re: Coin Collecting
« Reply #6 on: November 27, 2012, 01:29:00 AM »
I do not remember saying that rare coins will outperform real estate or stock investments.

I am not saying that coin collecting is the end-all or be-all of investing. 

I am saying that if you are interested in coins as an investment you should purchase the best investment grade ones available that you can afford at an auction.  Over time quality coins or bills will appreciate.  Many investors get enjoyment in the research and from the coins themselves.  Personally I just keep mine in a safety deposit box and have them valued occasionally to see the fair market value.  There is also an income tax advantage of investing in coins as in Canada we only pay tax on one half of the gain which is better than what we pay on interest and dividends.

Coin collecting, or just saving coins as an interest is not investing in coins.  Rarely will you find an investment grade coin and I would agree with you that you will not do well financially.  It is a hobby not an investment.

Art is also a non-productive asset.  Many investors have done very well by purchasing quality pieces at what you can afford in auctions.  The same can be said of antiques and firearms.

When investment advisors say that you should diversify they do not mean that you should only buy real estate, debt or stock investments .  My point is that there are many opportunities for investment outside of what you consider as productive assets.  I suggest that it is prudent to have many types of investments.

I enjoyed your comments.

Good luck.