Is it possible to invest for fun and profit? It’s a frequently enough asked question, which many investors have tried to achieve over the years. Timeshare owners bought villas, so they could enjoy a break and still make a profit, but often found there was risk associated with small print and foreign governments. In this article, we explore the world of gold and silver coin investments and ask whether it’s possible to collect and invest in these coins for fun and for profit.
Gold and Silver coins – an alternative form of investment
All investments have different values and attributes, aspects which will make them more appealing to certain groups of investors than others. Here are some of the attributes associated with gold and silver investments, which make them an appealing buy for many investors:
- Low-risk – historically gold/silver prices have performed well and generally risen. Whilst historic performance is no guarantee of the future, 2000+ years of gold and silver trading gives investors some sort of reassurance of their investments
- Safe haven – gold and silver are seen as a safe haven investment. This is particularly the case in times of economic uncertainty, where other groups of investors will divert their funds to precious metals and away from investments such as equities and property, etc.
- Balanced investment portfolio – almost all investment advisors would recommend an investor has a balanced investment portfolio.This helps to spread risk if one particular type of investment was to fail. Most advisors would recommend having a holding in precious metals. Advisors often recommend 5-15% of total investments is invested in precious metals, this largely depends on individual circumstances and attitudes to risk
- Low effort – investments in precious metals require relatively low effort and can be left for years unattended. This is not the case with all investments, e.g. properties need inspection and rents need collecting, equity prospects change so owners need to keep up to date with the stock market, etc.
What determines the price of a coin?
There are a number of factors which determine the price paid for a coin, be aware of these at the time of investment as this will have a significant impact on potential profits later:
- Weight and core precious metal value – the size and weight is obviously a major factor in the value of the coin. The core precious metal value of the coin will be determined by the underlying amount of gold or silver contained inside the coin.
- Purity level – it’s not just about the weight it’s also about the purity level. Coins are minted to certain purity levels (e.g. UK Gold Sovereigns are 22 Karat or 91.66% pure gold, whereas the Austrian Philharmonic gold coins are 24 Karat or 99.99% pure gold)
- Scarcity / collectability premium – collectable coins virtually always attract a premium over and above the gold/silver spot price. This is particularly the case for Vintage coins or modern sought-after coins. In general, for new issues, limited edition releases, which are likely to be popular are wise investments
- Dealer mark-up – coin dealers and gold/silver traders have to make a living and do this through the mark-up they make when selling coins. Therefore, always be cautious about the price you pay for a coin, shop around as some dealers have higher mark-ups than others!
- Sales tax –look into sales tax very carefully. This will vary from country to country and perhaps even state to state. There may be entirely legal loopholes that help buyers avoid paying sales tax. It’s well worth investigating your options before buying
- Condition –naturally condition is all-important. Gold coins, in particular, are highly prone to scratches as high-purity gold is soft and malleable. It’s advisable to buy high-quality, excellent condition coins only. Although coins which have condition issues but are reduced in price enough may still be worthwhile investments
Always buy from a reputable and accredited dealer
It almost goes without saying, but it’s so important here we go! Always, buy from a reputable and accredited dealer. Consider the following when choosing a dealer to buy from:
- Trade membership – check if the dealer is registered with a trade organisation, e.g. (American Numismatic Association, FENAP, BNTA, etc.). Although prices can be lower on sites like Amazon and eBay, the risks are higher – if you do buy from online marketplaces, ALWAYS check the background of the dealer
- Buyback guarantee – does your dealer offer a buyback guarantee? If not, why not? This is a useful backstop in case you need to sell later
- Online reviews – check their online reviews at places such as TrustPilot, eKomi and Google Reviews
Have security in mind
When owning gold and silver coins always have security in mind. In particular, take the following into account:
- Be safe! – if you intend to keep your coins at home invest in a safe, don’t keep them in simple to access places where intruders could take them
- Be discrete – don’t tell everybody you have lots of precious gold and silver coins in the house, if you have children around – make sure they don’t mention it either!
- Insurance – always ensure you are insured for your coin collection if it’s at your premises, it’s better to check you are insured before a loss (e.g. fire, loss or theft)
- Pay for storage – although this takes some of the pleasure away, you can pay for offsite storage if you need. This is obviously highly secure, but will also dramatically erode profits made over time
Collecting coins is fun
We have been quite serious throughout much of this article, but always bear in mind that collecting coins as well as being an investment can be fun too:
- Become a Numismatist – yes that’s right if you start to collect coins you also become a Numismatist, that’s the official name for people who collect coins (whether for investment purposes or for pleasure)
- Family heirloom–coins are a great vehicle to use to pass on as an inheritance. Buyers can gradually build their collection up over the years and then pass it on after their death to their loved ones, an investment, which can be many generations deep
- An investment children and grandchildren can enjoy – try showing children share certificates and gold/silver bars, they are not likely to be very interested! A coin album though is much more engaging to children and will provoke lots of questions!
Selling and being sober about profit
As we have said coin collecting can be fun. If you are buying coins as a medium-long term investment, always remember you need to sell them to make a profit! Be sober about their profit potential, in particular, consider:
- Selling –
- where will you sell the coins too? It’s often a good idea to sell your coins back to the dealer you bought them from if you can, as authenticity will already have been established.
- Sell to gold and coin dealers rather than jewellers, who will tend to offer lower prices, as coins will not be their core market
- Shop around, why not see what a few dealers will offer for your coins before agreeing to sell? The extra time it takes could prove very fruitful in terms of receiving a better offer for your coins
- Spot price – Be aware of the current spot price for your coins, when selling. This is the world spot price per ounce, click here for the current gold spot price and here for the current silver spot price
- Dealer margins – remember there are dealer margins to pay when both buying and selling.It’s best to aim to make a profit in the medium to long-term to cover these costs
- Security and storage costs – always take into account costs associated with security and storage
- No ongoing income – It’s all about capital appreciation with gold and silver coins as unlike with other investments, there is no form of ongoing income, e.g. rent (for properties) or dividends (for equities)
Have fun and make profit selling coins
We have now come to the end of our guide and hope that you now feel more informed about the world of coin collecting and its investment as well as fun potential! Why not investigate coin collecting as a hobby yourself and see if your investment aspirations can also be met through numismatics.