Coins: Money in the Bank

Gabor Bognar submitted further feedback on collecting coins:

Chris, I’ve spent some time looking at this issue, though I’m not myself a numismatist. For the avoidance of doubt I’m not expressing an opinion on the attractiveness of this asset class, just sharing some of the information I’ve found:

Robert Brown wrote a study on the long-term rate of return on rare coins in the Journal of Financial Planning in August 2005.The Professional Coin Grading Service (a division of Collectors Universe, Inc.) publishes various coin price indexes, including historical data back to 1970. The US Coin Values Advisor website, maintained by Daniel J. Goevert, publishes price and rate of return tables for individual coins by grade starting from 1950.

As an economist, I’d say that price indexes of the type presented above may overstate the rate of return available to investors even if the underlying data and the index calculation methodologies are correct. This is due to the fact that price indexes do not capture some expenses a coin investor will inevitably incur: transaction costs, insurance, storage. However, in the absence of available data I cannot quantify the impact of these expenses.

And so did Jim Parker, responsible for Product Marketing & Management for Samsung’s CDMA, UMTS & Mobile WiMAX Wireless Infrastructure product lines:

No, in my opinion is a bad investment as the bid & ask spreads are too high! You can buy: stocks, bonds, real estate and even gold w/o incurring the high bid & ask spreads that you have in collectables. If you want to collect coins, so be it — just do not do it as an “investment” as you will not likely make any money,