Investing In Coins: Guide for Investors and Hobby Collectors
Investing in coins is in fact an investment, but it is so much more than that. You can also pick your hand at collecting rare coin collectibles, which can be a rewarding hobby.
There are two categories of coins that can be bought as an investment or collectible. People tend to buy bullion coins for investment purposes and collectors usually buy numismatic coins to add to their collectibles.
Whether you are an investor, collector, or are looking to dabble in rare coins, here’s what you need to know to determine which coin is right for you.
The $10 Indian Head gold coin is highly collectible.
Bullion Coins vs Numismatic Coins
Numismatic coins are bought and sold by investors for their rarity, metal purity, and historical value. Their value is based on the coin's rarity, condition, and collector demand.
Numismatic coins achieve their value from the way they are minted, their historical value, or being unique in their category. This value can increase or decrease depending on demand.
Numismatic coins usually attract collectors who are willing to hold their coins for years in order for the value of their coins to increase. Apart from being a long-term investment, numismatic coins can be a great collecting hobby.
The bullion market on the other hand is much larger and there are more investments made in this category. As a result, there is more liquidity in the bullion market. Bullion coin investors all over the world can easily buy and sell their gold or silver coins.
If you are not that concerned with collecting but are more interested in a safe haven asset to diversify your investment portfolio during an uncertain market environment, buying bullion coins may be a better option.
3 Reasons to Invest in Coins
1. Coins Offer Inflation Protection
Investing in coins is a great way to combat the risk of rising inflation. Inflation is the rate of price increases of goods and services over time. It is an unfortunate reality of things in the economy getting more expensive, where the cost of living for the average consumer rises.
The effect of inflation is that the value of each dollar (or unit of currency) shrinks.
To deal with the depreciation of your money, you must invest to compound your wealth and increase your purchasing power. One way to do this is by investing in physical coins.
While it may not be the best inflation hedge in all circumstances, physical gold coins have been the traditional safe-haven asset to beat or keep up with the pace of inflation. This means, if you are just holding onto cash, without having some of it invested in an inflation hedge, your cash will lose value (purchasing power). Investors can hold onto physical coins which can help maintain the value of your investments even as inflation persists.
2. Coins Hold Intrinsic Value
The characteristic that makes coins a valuable asset is that they are a physical asset. As such, coins hold intrinsic value. In other words, they are an asset that has value on its own.
For example, gold and silver have intrinsic value because they are raw materials that can be converted into other goods. They are metals that can be used as components in the manufacturing process of goods. These factors are why gold coins and silver have market value.
Coins and physical assets have intrinsic value because of their natural properties. Due to its physical makeup, gold is malleable, durable, and transportable. These qualities make gold useful in a variety of ways.
Gold as a physical asset is also scarce, which makes it a desirable metal. It is also an attractive metal that is used for aesthetics like jewelry and luxury goods. There are many use cases for physical precious metals. All of these characteristics make physical metals a sound store of value.
3. Coins are Great Portfolio Diversifiers
Coins and physical assets are a helpful way to diversify your investment portfolio. This is especially during turbulent economic and stock market times.
There is a lot of uncertainty in the stock market right now. The economy is experiencing the highest levels of inflation in more than 40 years, and the Federal Reserve is stepping in to increase interest rates in response. Couple that with the war between Russia and Ukraine and there are many elements that are causing short-term market volatility.
Investors understandably get worried when the broader markets experience turbulence.
With the S&P 500 down more than 16% since the start of 2022, investors are concerned if there is still more room for stocks to fall. This is why having a diversified portfolio that includes uncorrelated assets like coins can be a helpful option for investors.
The investment performance of coins and physical assets are uncorrelated to the performance of traditional investments like stocks and bonds. This makes them an important asset class to consider. Adding uncorrelated assets together in the same portfolio helps reduce overall portfolio risk, especially during market conditions where there is a lot of uncertainty.
3 Tips / Strategies for Investing in Coins
1. Store your coins properly
Physical assets have to be stored properly. First you have to determine if you want to keep you physical coins at home, in a safety deposit box at the bank, or with a third party storage facility.
You may think it’s the easiest to keep your coins at home but there is some management that comes with holding coins, so that responsibility would be on you. If you choose to keep your physical coins at home, make sure to store it in some place that you remember and that is accessible in the event you need to retrieve it for an emergency. Make sure your place of storage is fireproof, will not cause water damage, and you keep passwords and safety keys where the coins may be stored safely.
You can pay an administrative fee to a third-party like a depository to hold your coins. Precious metal depositories provide a high level of security, so investors can be sure that their assets are safe. With depositories, the other level of protection is their account record keeping. This records storage of your assets to keep track of them and prevent any loss.
Lastly, keeping your coins with a third-party adds a layer of insurance. Depositories have insurance policies that state, in the event of a loss of your assets, you will be reimbursed for the theft or any damages. Insurance policies reassures the investor that you can trust a precious metal depository.
2. Manage the costs of coin investing
Gold coins come at a higher premium compared to the spot price of gold bars because of the extra mining costs. Furthermore, keep in mind that to manage your physical coins effectively, there are some costs to take into account.
Some fees to consider when managing coins and physical assets include storage and management fees, insurance, and other costs. When factoring in these expenses, it could reach up to 15% of your investment, which may seem like an issue when you’re trying to make money off the investment.
3. Hold coins for the long-term
When investing in coins, you must be aware that this is a long-term, buy-and-hold type of investment. Since physical coins cannot be easily bought and sold on the market like a stock of a company, investors should keep in mind that they are allocating toward an illiquid asset. This is not necessarily a negative, it’s just the nature of investing in coins.
Physical precious metals coins are reliable investments and have stood the test of time in both good and poor economic environments. That said, coins can hold their value and even increase in value over the long run as long as you don’t sell prematurely.
Because of their smaller size, coins are easier to store compared to physical gold or silver bars. On the other hand, bars are more space-efficient per unit of weight for storage. So there are trade-offs between the two forms of bullion.
3 Coins to Invest In
One of the most popular types of coin investments is gold coins. You can buy gold coins through dealers or individual sellers, and purchases can even be done online. When it comes to owning gold, gold coins are the more popular option among investors.
You can get your coins in different sizes, varying designs, finishes, and origins. There are different combinations of gold coins or collectibles to choose from depending on your budget and investment goals.
Shop for gold coins at Gainesville Coins by following the link.
One of the benefits of silver is that it’s cheaper than gold and it provides a lot of the similar benefits of investing in gold. Silver coin investing is a popular way to gain exposure to the precious metal.
Silver coins have a history of being used as a medium of exchange in the U.S. 90% silver coins were used for money in the U.S. as recently as the 1960’s.
Gold and silver coins made by the United States Mint.
Silver is a commodity and many investors turn to commodities during periods of high inflation, when the market is down and when there’s a slowdown in the economy. All these events are currently present, which could make it an opportune time to place your bet on silver coins.
Shop for silver coins at Gainesville Coins by following the link.
While platinum coins may not immediately come to mind compared to gold or silver coins, they have become very popular among precious metal investors. Gold and silver have been around for a while and have gained market trust but platinum has many valuable properties that make it a strong contender.
Platinum is a rare metal used in a variety of different sectors. Platinum coins can be a great way for gold and silver investors to diversify. Platinum is rare and in high demand, which makes it a valuable precious metal. It also has a wide range of industrial uses.
Written by Paulina Likos
Read more about investing in coins and collecting coins from the numismatic experts at Gainesville Coins:
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