Viewpoint: Enjoy numismatics for what it is: a hobby

By Richard Giedroyc

Former Krause Publications President and past American Numismatic Association President Clifford Mishler published an outstanding article in the Jan. 24 issue of Numismatic News addressing if collecting is an investment or speculation.

Within the article Mishler says, “The acquisition of a coin by a collector can never be an investment, in my opinion. It can at best represent enjoyment or satisfaction … A dealer can acquire a coin as an investment, as he can prudently calculate a profitable return in a reasonable time based on his marketplace knowledge and insight.”

This was quickly followed by a letter from retired stockbroker Scott McElmeel appearing in the Feb. 7 issue in which McElmeel states, “If you listen to the stories in the coin publications every week about the sale of this coin or that coin, you start believing that rare coins are good investments … A simple ROI [return on investment] calculator shows that he [a collector and a coin McElmeel uses as an illustration] averaged a little over five percent return annually during that period. That return is far from impressive, but is window-dressed to look otherwise.”

McElmeel concludes, “The point I’m making is don’t buy coins as investments.”

Retail coin prices are tracked on a weekly basis by a number of hard copy publications as well as online. I provide this information for Numismatic News. The trend of publishing this information weekly rather than monthly or annually began during the 1960s, a time when the number of coin collectors spiked. The demand for earlier better-date coins outstripped supply, resulting in an increase in prices. Between this appreciation in value and publications willing to present value information weekly, the impression was left that coins are a great investment. If that was true, wouldn’t everyone be investing in coins rather than in alternative investment vehicles?

There are some coins that truly are a sound investment. They are few and far between. Their future value is always going to be a crapshoot based on chance rather than on logic. For most coins, if they increase in value it is either due to an increase in their intrinsic value, otherwise the increase is too minimal for it to give a return on investment that competes with what happens in the stock and bond markets.

If you are truly a coin collector, the future value of your collection is secondary to the pleasure you receive from the pride in ownership. If you entered the “business of coins” planning to make a profit or to leave a significant legacy as your primary goal, you need to think again. This is a hobby. Enjoy it as a hobby.

The truly rare coins that are more likely to appreciate significantly are small in numbers. They are expensive. You can’t buy a share in a coin as you can in a business.

Repeating some of Mishler’s comments, coins do not compound or pay a dividend. I will add to this that age does not make a coin more valuable. Dealers and auction houses will take a discount or commission when selling a coin for you. In addition, you are dealing with a passion commodity, a commodity to which you have also taken delivery. This commodity must be delivered in order to be sold, unlike a stock or a bond that can be sold by telephone or by electronic transfer.

This article is not meant to discourage anyone from collecting coins. It is meant to help investment-minded collectors to consider an alternative, that alternative being to invest in publicly traded companies that market or service collectible coins. You may want to add fine art and other collectible-oriented companies to this mix.

Just as with any other segment of the stock market, there are small, medium and large cap stocks of publicly traded companies available that are either the source of or support the hobby of coin collecting. The difference is there are fewer of them from which to choose.

I recently attempted to identify sufficient numbers of any collectible “source and support” companies, finding only about 30 of them. I concluded from this that anywhere throughout the collectibles hobbies there are more mom-and-pop businesses than large companies offering stock. For that reason, a collectibles stock mutual fund appears to be too narrow in scope to be practical to establish.

Among the large cap stocks that are responsible for issuing or selling things people collect are such companies as Amazon.com (AMZN), Coca Cola Company (KO), Disney Corporation (DIS), eBay (EBAY), Global Indemnity Ltd. (GBLI), McDonalds Corporation (MCD), Tiffany and Company (TIF), and Time Warner (TWX). None of these are numismatic in orientation. Global Indemnity Ltd. is the parent company for Collectibles Insurance Service, through which coin collections can be insured.

I was only able to identify 10 companies through which stock could be purchased that are oriented towards what I will call “the business of coins.” Once again, this is far too few to be able to use as a collectibles or coin stock mutual fund. Adding to this, only five of these companies are in the United States. These are Collectors Universe (CLCT), DGSE Companies (DGSE), Sotheby’s (BID), A-Mark Precious Metals (AMRK), and Johnson Matthey Metals (JMPLY).

The other coin-oriented businesses are Poly Culture Group (XHKG:0363), Stanley Gibson Group PLC (SGI), Johnson Matthey Metals (JMAT), De LaRue (DLAR), and the Mint of Poland (MNC PW). None of these are available through normal U.S. investment channels.

I agree with Mishler and McElmeell. Enjoy the hobby, but don’t mix hobby with investments.

This “Viewpoint” was written by market analyst and columnist Richard Giedroyc.

Viewpoint is a forum for the expression of opinion on a variety of numismatic subjects. To have your opinion considered for Viewpoint, write to David C. Harper, Editor, Numismatic News, 700 E. State St., Iola, WI 54990. Send email to david.harper@fwcommunity.com.

More Collecting Resources

• More than 600 issuing locations are represented in the Standard Catalog of World Coins, 1701-1800 .

• With over 22,000 listings and 13,750 illustrations, the Standard Catalog of World Paper Money, Modern Issues is your go-to guide for modern bank notes.