Thanks in large part to the combination of the Internet and an economy that has been wildly unpredictable for the better part of a half-decade, consumers around the country are beginning to broaden their horizons when it comes to investing their money in a way that will help it grow even despite the economy’s slow growth and other woes. One such way that consumers have been investing is to purchase rare coins that either hold or increase their value over time. The idea behind the investment is rather simple: Something that is quite rare is likely to go up in price as it ages, becomes even more rare, and harder to find for future investors.
The logic is strong, and the rare coin market itself is actually quite strong as well. It’s worth noting, though, that an investment in rare coins is still at least partially a gamble. That remains true of every kind of investment, from traditional stocks and precious metals to the world’s rarest, most high-value coins. That being said, rare coins have enjoyed quite a bit of stability in recent years and those consumers who are considering choosing this as an investment strategy would do themselves a favor by learning about the history and future of the rare coin investment that they’re about to pursue.
Much Money to Be Made, But Declines are Not Unprecedented
The belief that rare coin investments are free of traditional risks and downturns is one that is not borne out by history. While it’s true that rare coin investments are typically more stable than other types of investments, and their performance is not as closely tied to the economy as stocks and bonds, they still experience fluctuations in price and value that can affect a consumer’s overall portfolio and net worth.
Perhaps the most shining example of the fluctuation in rare coin investment prices can be found in the 1989 downturn that affected the rare coin investment market. While the wider economy was not exactly over performing, rare coins were decreasing in value quite dramatically. It took a full six years for the CU3000, which measures the value of rare coins currently used as investment tools, to bottom out. By 1995, the market finally began to tick upward consistent for the first time since its initial downturn.
Strong Performance Since the 1989 Decline
It’s worth noting that the 1989 decline in rare coin investment prices is actually a bit of an anomaly. Since its steady rebound that began in 1995, the CU3000 has added value virtually every single year. Even coins not measured by that index have risen in value over the course of the past two decades, leading to a plethora of positive news stories that have made their way to the likes of the New York Times and the Wall Street Journal.
Today, as the federal government ponders its austerity-like “sequester” in an effort to eliminate the federal budget deficit, the inclination to forego stocks and invest in rare coins is even stronger. That demand has boosted rare coin prices and values, leading to greater financial gain for those already invested. The time to get started with this investment, therefore, is now – or yesterday.
Breaking Down Investment Quality and Outlook: Two Types of Rare Coins Investing
When people think of rare coin investing, their first inclination is to picture a market dominated by coins that haven’t been in circulation for a hundred years or more. After all, in most peoples’ minds, that is what truly makes a coin “rare.” The truth, though, is that this is only one sector of the investment marketplace. It is also the smallest form of rare coin investing done by today’s consumers. The term for this type of investing is “numismatic” rare coins, so keep that in mind.
Bullion rare coin investing is the most common kind of investment strategy and it’s the one that most often dominates consumers’ portfolios. Bullion coins have very high concentrations of rare metals, typically gold, and their value is very closely tied to the price of an ounce of gold itself. In a market where gold seems to know no real direction but “onward and upward,” it’s easy to see why the rare coin market has been performing so well over the past two decades.
Driven By Gold Prices: No End in Sight for Bullion Rare Coin Values
The great thing about gold bullion is that it seems to be on a constant uptick as people reevaluate their faith in the Federal Reserve, the stock market, and other traditional drivers of economic growth and overall investment value. Gold has skyrocketed to record highs in recent years and it shows no real signs of stopping that upward march. Because gold is so heavily concentrated in many of today’s most popular bullion rare coins, these coins have also increased in value in a significant way since gold began its upward trend about a decade ago.
Today, bullion rare coins are considered one of the safest and most risk-free investments on the market. That characterization is largely driven by high gold prices, uncharacteristically steady silver prices, and rising costs for an ounce of platinum. And, because demand for these coins is going up as the materials used to create them increase in value, added demand further increases their asking price. That makes for a powerful investment mechanism that far outperforms the unpredictable, and occasional anemic, New York Stock Exchange and other traditional indexes.
Historical Coins: A Good Strategy, But Hard to Pursue
The market for historical coins, known as numismatic rare coin investing, is a bit tougher to characterize. The simple fact of the matter is that it’s easy to come across bullion rare coins distributed by the United States Mint and several foreign monetary systems. Historically rare coins, though, are no longer being produced at all and they’re exceedingly hard to find. Whether for investment value or personal worth, these coins are rarely sold by those who hold them. More an heirloom than a commodity, it can be hard to base a strategy around these coins.
It’s also harder to commit to a real investment strategy in historical coins. While they do increase in value, and can result in a great return, they often cannot be bought in large quantities. They’re more of a niche and less of a high-growth strategy, making them a better hobby than a retirement account.
Always Remember the Five Factors that Drive Rare Coin Prices and Strategies
Because rare coins are more of an independent pursuit than a mainstream investment strategy, they benefit or suffer at the hands of different economic situations and consumer indicators. Generally, professionals in the rare coin industry have broken down investing into five major factors that will either cause coin prices to increase or decrease. These five major factors are as follows:
1. Interest rate activity (uncertainty will drive coin prices higher)
2. Elevated prices for energy, including electric and oil commodities
3. A bear market on the wider stock exchange
4. Political or economic uncertainty or unrest
5. Elevated demand for gold bullion and other precious metals
Judging by this list, prospective rare coin investors can see why today’s economic and political realities have led to a bullish rare coin investment scenario. Economic certainty remains far from reality, while political dysfunction in the United States has placed the stock market and employment prospects into peril repeatedly over the course of the past five years. With no end in sight for these disturbances to the economic and political systems, rare coins look to increase their value dramatically over at least the next year, if not longer, until the United States figures out its economic picture and its political system.
Even With the Best Market, Investment Strategies and Companies Matter
One thing that virtually every consumer learned during the most recent economic collapse was that it mattered who managed investments and pursued their investment goals. Major firms collapsed, others were able to escape from the mess, and still others weren’t affected at all. The truth is that investment managers and investment companies do vary in every industry, including those that manage rare coin purchases, investments, and more.
Consumers who are in the market for a major shift in their investment strategy to rare coins should be sure to do a fair amount of research into coin sellers, investment managers, and brokers, to ensure that they won’t be getting taken advantage of with high fees, lofty and unfair rare cone prices, and other pitfalls that are characteristic of less reputable companies in the industry.
Professionals are not just salesmen and investment managers, but coin enthusiasts themselves. That makes a big difference. Choose a reputable company with low fees, fair rates, and great prices, and this investment can pay off in a big way in the near future.