An investment in rare coins can be profitable and enjoyable. From collectors to investors, these coins can help to diversify a portfolio. Each investment can be done for a coins numismatic value or the value of its metal content. For many years, the rare coin market was comprised almost entirely of collectors. Most of these collectors began a fascination with coins in their youth and began to gradually purchase more coins. In modern times, the rare coin market has changed significantly. Many buyers of rare coins do so in order to invest in the metal’s value. They may also purchase a coin as an investment instead of to collect it.
Benefits of Investing in Rare Coins
When inflation increases drastically, the value of someone’s money goes down. During World War II in Germany, inflation increased so drastically that people supposedly had to purchase a loaf of bread with a wheelbarrow full of cash. Although the United States has not dealt with this level of inflation for a long time, it can happen again. One of the few ways to beat inflation is to invest in a product like a rare coins, bullion or high-quality jewelry. As prices creep upward, the value of the investment will keep match. Rare coins are a great way to diversify a portfolio. The goal of any portfolio is to provide investments that can appreciate in any economic situation. Rare coins are good diversification tools because they have characteristics that regular stocks and bonds do not have.
While the coins are appreciating in value, the new gains will be tax-deferred. The government cannot tax the coins until they are sold. As long as the coins are purchased and kept for at least six months, the coins will only be taxed at a low capital gains rate when they are sold. In certain situations, the coins may be able to be considered section 1031 exchange.
When it is time to sell a rare coin, the investment is extremely liquid. Starting in 1963, the rare coin industry has released a deal price sheet. This has made it easy to value a coin and figure out its worth. There are also professional grading services like NGC and PCGS that can help. Once a coin has been valued, it can be placed on the market or auctioned off. Many rare coins can sell in as little as a few hours or days. There are also coin shows available that can make selling the coin even easier.
Privacy and Portability
If someone wants to invest in a stock or bond, they have to disclose it on their taxes. Likewise, the company normally has to comply with Securities and Exchange Commission rules and release information to the government. With rare coins, this is not always necessary. As long as the value of the coin is 15 percent higher than its metal content, it does not have to be reported when it is purchased or sold. This enables individuals to have an investment in privacy.
Some investors want to find portable assets. These assets are items that have value and can be moved across borders without disclosure requirements. In typical portfolios, investors possess stocks or bonds that cannot be easily moved from one location to another. With a rare coin, investors have a valuable item that can be slipped in a wallet and often weighs less than two ounces.
As a part of wealth planning, many individuals want to find an item that can be easily transferred to someone else. The best transferable investments have a concentrated value and are lightweight. These items are typically easy to ship around the world.
An Overview of the Business
There are essentially two types of coin dealers available. These companies are either wholesalers or retailers. A wholesale dealer is looking for new material to bring into the market place, visits auctions and often has advertisements issued for buying coins. Later on, these items are normally sold in bulk quantities to the retailer. On the other side of the equation, the retailer will receive his coins from the wholesaler. Many of his clients are single-coin buyers. When selling coins, a retailer will often pay the owner more since the middleman does not have to be used.
When looking for a reputable dealer, coin investors can visit companies like Monaco Rare Coins. The best dealers will always be listed within an organization like the Professional Numismatists Guild or the American Numismatic Association. They will also follow the code of ethics and have many years of experience in the field.
To receive the best deal, investors should always look up the estimated value of a piece beforehand. These numbers are good as a guideline, but will not always reflect the value exactly. Each dealer has to make a profit margin. In addition, they have to pay someone to look at and price each piece. This makes it so the estimated values can only be guidelines. They can help the investor know if their piece is worth hundreds or thousands.
When selling a coin, the more common or low quality the coin is, the higher the profit margin must be. This is because it can be extremely difficult to sell a coin that is low-grade. Likewise, there is a huge dollar value difference. A dealer may only buy a 1940 Wheat Cent for two cents and sell it for five cents. Although this is more than a 100 percent profit, three cents is not a significant amount of money. With higher value pieces, the dealer may lower the profit margin because they sell faster and have a higher dollar value.
The entire profit margin of a coin is based on market demand and how quickly it can be sold. It is also based off of how high the dollar value is. Likewise, coin dealers set the profit margin and cost of the coin based off of the condition of the coin.
What to Expect
Many people feel shortchanged after visiting a dealer. They expect a great deal from the dealer, but most dealers actually spend a lot of time shifting through common junk coins. After years of expertise in the field, they can tell immediately that the coin is not going to be worth much. To receive a higher price, sellers must own rarer coins. It can also help if they sort through the coins on their own first. If the coins are sold in a bundle, the dealer might assume that the best coins have already been removed. To get a better price, the seller should sort out any rare coins before they try to sell them.
Investing in Rare Coins
Over the last 40 years, rare coins have been able to outperform many of the major indexes. These gains are significant and occurred even during times of high inflation. For a long-term investment that is extremely portable, rare coins are a must-have for every portfolio.