Investing in Collectibles

I’ve never been very optimistic about making money with collectibles. When I was young I dreamed of owning one of the coins listed in a coin book with a value of many thousands of dollars, but I never found any of those coins in my change. A while back I was asked to take a look at a deceased family member’s coin collection, and this gave me a chance to see how this collection fared as an investment.

The coins I examined were collected over a great many years from change; none of the coins were purchased from other collectors. So, the “investment” cost was just the face value of each coin (adjusted for inflation).

For this little test, I decided to focus only on coins at least 50 years old. Among these coins, I was surprised to discover that their total current value exceeded the total face value (adjusted for inflation based on each coin’s date) by 19%. This means that the average rate of return was about inflation plus 0.25%. In fact, the return is a little better than this because some coins were saved in a later year than the year that they were minted.

By stock market investing standards, beating inflation by less than 1% over several decades is quite dismal, but I was surprised that the collection even kept up with inflation. I remain pessimistic about collectibles as investments, but many collectors are in it for the love of collecting rather than investment returns.

Comments

  1. geneSeptember 17, 2009 at 1:28 AM

    A good additional test would be to check how much these coins actually sell for (eg. on ebay).

    I remember collecting hockey cards and buying the guides to see how much they were worth, but I then learned that the guide values were actually about twice what I could get at the sports card shop. Perhaps one would do better if they sold them oneself, I never pursued it.

    ReplyDelete
  2. Michael JamesSeptember 17, 2009 at 8:55 AM

    Gene: For a quick sale, half of the guide value is a reasonable estimate. As with any other type of sales, the more work you're willing to do to find a buyer, the higher the price you can get. Coin novices tend to overestimate the condition of a coin which inflates value estimates considerably. I'm reasonably confident that my value estimate of the collection I looked at was reasonable.

    ReplyDelete
  3. geneSeptember 17, 2009 at 11:24 AM

    Your original article reminds me of a tongue-in-cheek comment I heard from a financial commentator (and I probably mentioned it here already). He said that since US postage went up faster than inflation, their permanent letter-mail stamps were a great inflation hedge.

    In that case, the condition of the stamps is irrelevant since their purchase power remains intact.

    ReplyDelete
  4. UnknownFebruary 11, 2010 at 10:36 PM

    Check out StampSelector.com at http://www.stampselector.com - a Philatelic Investment Blog

    ReplyDelete

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