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Coin Collecting – Hobby or Investment?

October 23, 2017 0 Comments

It is impossible to escape the fever right now – the Dow Jones has broken through 23,000. Everyone is dashing into stocks. After all, since April 2013 the Dow has been breaking records continuously, and the fever for stocks is running high. Remember though, it peaked in October 2007 just over 14,000, and took almost 6 years, till April 2013, to get back to that place. Six years of negative returns. Of course, after those 6 years of collapse and slow recovering, it has been in positive territory ever since. It is today 64% up on its October 2007 high. But wait. If you had switched to gold at that 2007 peak, you would have been 98% up by August 2011, a much bigger profit in a much smaller time.

What about in the longer term? If you had bought the Dow, and bought gold, 50 years ago, gold was $258 an ounce in 1967, and today, well off its 2011 high, it is $1,275, a growth of 390%. Over the same time, the Dow has gone from 6,480 to 23,000, a growth of 255%. So which was the best investment? Seems obvious, even allowing for not getting in or out at exactly the right moments. Yet there is a fever in the human mind, that makes us follow the herd – even over the cliff. The adage ‘buy low and sell high’ only works in hindsight, so maybe that should be ‘buy as low as you can, and sell when you feel you have made enough’.

We all know that the rise in the Dow won’t last for ever – so is now the time to switch back to gold? Only you can decide that, but most of us are aware that gold and stocks work against each other, so it always pays to hedge your bets and spread your money around a little. Which brings us to coins. There is something about hard, tangible metal that makes it feel like ‘real’ money, and how many people collect stock certificates? Coin collecting has suffered a decline for some years now, with more and more of our lives spent in the virtual world. But consider this. If you can engage in something fascinating, filled with history, reaching around the world, and involving things of beauty made of precious metals – and at the same time beat the stock market in the increasing value of your investment, what’s not to like?

Many coin collectors begin with circulation coins, because these make a low-cost hobby. Sooner or later most start buying silver, and then gold coins, and then you are moving invisibly from hobby to investment, as those numbers up above tell us. It makes sense to shift your collecting interests to coins in precious metals, and it always pays to buy the best, and avoid gimmicks as much as possible. Because the remarkable thing about coins is that their value can lie in the melt-value of the metal, but also in the rarity and unique qualities of the coin itself. The ideal coin to have in your collection will be in a metal that has value as a melt, but which also has something you judge will be of interest to future collectors. The more you learn about coins, the better you will become about making that judgement. As for the melt-value, the market and an unknown future will decide that for you!

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