Flush Investors Take a Shine to Rare Coins

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Rare Gold Coin Collection Goes Under The Hammer
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By Nia Hamm

Given the record gains Wall Street posted in 2013, you might be tempted to think the financial dog days are behind us, at least for now.

But many wealthy investors continue to pour more of their fortunes into nonfinancial "treasure assets," such as collectible rare coins, in an attempt to diversify their portfolios.

"In the environment that exists right now, where the Dow is very high ... most of the people buying rare coins ... are people who are taking profits as a result of a semibull market ... and want to reinvest some of that money into nondollar-based-type investments," said Terry Hanlon, president of the Professional Numismatists Guild.

While the wealthy have always acquired art, antiques and other such valuables, experts believe that many of today's treasure seekers figure they're not only getting a beautiful object with their purchase but a savvy investment as well.

"We've been seeing many new buyers entering the rare-coin market in recent years," said Greg Rohan, president of Heritage Auctions, which claims to be the world's largest collectibles auctioneer. "Many have collected fine art and invested in precious metals but now also are diversifying their portfolios with rare coins because they can appreciate their beauty and history, while the coins appreciate in value over the long term."

In 2012 the world's millionaires devoted an average of 9.6 percent of their fortunes to nonfinancial assets, such as collectibles, according to a survey by Barclays Wealth and Investment Management and Ledbury Research.

The poll, of 2,000 people with investable assets of $1.5 million or more, also found that the proportion of wealthy individuals who own treasure assets has increased over the past five years. Coin collections, specifically, are up about 2 percent.

Drawing a Pretty Penny

But what really motivates investors to buy collectibles? Is it perceived financial benefits, emotional impulse or, perhaps, both? The answer isn't clear.

Markets in fashionable alternatives such as art [and] coins ... are all inherently speculative investments. They produce no income [and] have no future productive capacity.

"All types of financial decisions are inescapably tied to our emotions, and behavioral pitfalls [such as] fear, greed and a host of cognitive biases plague portfolios more than the markets themselves," said certified financial planner Milo Benningfield, founding principal of Benningfield Financial Advisors. "These pitfalls are magnified exponentially when contemplating art, coins and other collectibles."

Emotional investment or not, collectible rare coins are drawing a pretty penny. About a decade ago, a six- or seven-figure price tag was an eyebrow-raiser. Today, not so much.

"The 'Mona Lisas' and Gauguins of numismatics are just exploding in price, as records are being broken virtually every time they come up for sale at auction," said Jeffrey Bernberg, past president of the Professional Numismatists Guild, in a news release.

In fact, rare coins soared 248 percent in value over the past 10 years, according to the Luxury Investments Index, found in the Knight Frank 2013 Wealth Report.


Fear-Driven Diversification

"I think people are starting to decide that they want to start dipping their feet in the water again," said rare-coin dealer Ken Smaltz, who owns K. Smaltz Inc., a company that buys and sells rare coins and precious metals. Smaltz said he's seen an increase in his business within the last several months.

"People are concerned about the economy," he said. "All of these fears cause investors to possibly seek to diversify their investment, and the type of investments they ... look for in this type of environment are usually precious metals and rare coins."

The recent spike in sales of collectibles, such as rare coins, art and antiques, may reflect the increase in liquid assets the wealthy have to spend.

"People [are] taking some of those profits derived from the equities market and the stock market and putting some of that into rare coins," said Hanlon of the Professional Numismatists Guild.

There's no question the rich have gotten richer. The average net worth of the so-called "Forbes 400," Forbes magazine's annual listing of the richest Americans, is now a record $5 billion. That's $800 million more than a year ago.

And a recent study compiled by Wealth-X, a firm that researches ultrahigh-net-worth individuals, found that the wealthiest people in each U.S. state were 19 percent richer last year than they were in 2012.

That gives rich investors more disposable income to spend on luxury items such as collectibles.

Like any investment, rare coins and other collectibles -- considered safer than stocks by some -- carry their own risks. In fact, some financial experts, including Daniel Egan, director of behavioral finance and investments at brokerage services firm Betterment, are reluctant to recommend buying treasure assets to their clients.

"Markets in fashionable alternatives such as art [and] coins ... are all inherently speculative investments," said Egan. "They produce no income [and] have no future productive capacity.

"The entire reason you 'invest' in them is that you may be able to sell them to someone else in the future for a higher price," he added.

Rare coins can be bought or traded through auction houses and dealers or directly from individual owners. But the market is unregulated, making investors frequent targets of fraud.

The office of New York State Attorney General Eric Schneiderman warns investors of this danger.

"There are many steps potential investors can take to minimize this risk, including conducting advance research about the coins and requesting full disclosure from the vendor regarding the value, source and future market value of the coins," said a spokesman for Schneiderman's office.

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Tom

Hi

February 21 2014 at 11:26 AM Report abuse rate up rate down Reply
BANDIT BILL

When I was a kid I hung around friends that collected coins so I did too. As a late teen and into my late 20's I wasted my money more foolishly. Thank god I kept the collections I finished. Although I thought at the time $3- $10 for certain coins was a lot I now have them at 100x their value. I started up collecting again in my 30's and was amazed at that time how much they had went up!! It's the 1 greatest investment I've made. And I never started to collect for gain, but for fun.

February 21 2014 at 11:20 AM Report abuse +1 rate up rate down Reply
Mr. Sinatra

I have a few hundred silver dollars I bought for about $5 each years ago. They've appreciated to in the neighborhood of $30 or more in the last year or so. I won't retire on it, but what the heck. I hardly missed the money at the time. I also have a few hundred Indian head pennies. They now sell for a few bucks a piece. Not too shabby. My house was robbed a couple years ago and they didn't even take the silver dollars. They're very heavy... and thieves are lazy! lol.

February 21 2014 at 10:16 AM Report abuse +1 rate up rate down Reply
lmrangel1956

What is paper money worth from Iraq? With Saddam face and without

February 21 2014 at 10:01 AM Report abuse rate up rate down Reply
1 reply to lmrangel1956's comment
BANDIT BILL

Not much except for the satisfaction that he's dead. 10's of thousands came home with vets.

February 21 2014 at 11:22 AM Report abuse +1 rate up rate down Reply
pulletsurprise2

The only ones who make money off "collector coins" are those who can afford them and sell them for big profit to those who can barely afford them.

February 21 2014 at 9:13 AM Report abuse rate up rate down Reply
1 reply to pulletsurprise2's comment
BANDIT BILL

Jealous? I bought coins as a kid cheap instead of candy. Now they're worth $$$. Good deals can still be had at auctions or even Ebay. But do it if you enjoy it. Collecting as you say and investing are 2 completely different things that at times meet in the middle.

February 21 2014 at 11:28 AM Report abuse +1 rate up rate down Reply
jurmik

I have hundrets of coins I have collected from my travels to 40 countries, from Africa to South America, near East, UAE, what to do with them now..drop them into a Unicefff globe at any Euro airport.

February 21 2014 at 7:45 AM Report abuse rate up rate down Reply
1 reply to jurmik's comment
Robert

I mailed mine to the United Nations where they have an organization that uses the coins to fund projects to help child around the world receive vaccinations, food, water, etc.

February 21 2014 at 8:16 AM Report abuse -2 rate up rate down Reply
Sparky5229

don't forget to save your BIT COINS ha ha ha .

February 21 2014 at 7:26 AM Report abuse rate up rate down Reply
mjfelock

I own a genuine, real, authentic, real coin that is an apport

February 21 2014 at 6:41 AM Report abuse -1 rate up rate down Reply
alfredschrader

Best way to make money off coins is to open a coin shop and sell investment coin sets.

February 21 2014 at 6:41 AM Report abuse -1 rate up rate down Reply
JackieRay

do not buy coins with BC dates they are fakes

February 21 2014 at 12:08 AM Report abuse -3 rate up rate down Reply
1 reply to JackieRay's comment
dan

No **** Sherlock.

February 21 2014 at 9:17 AM Report abuse +1 rate up rate down Reply