Investors who have turned to buying rare coins already know the value of turning their cash into a real investment. Rare coins bring new meaning to hard currency, especially in a time when the value of paper currency is in flux.
Turning to rare coins is not an easy switch if you are used to the ease and speed of executing security trades. While rare coins can be bought through high-volume dealers with some ease, it takes more skill to accurately identify a coin’s actual value and to negotiate a favorable price, especially when dealing with individual coin collectors or local independent coin retailers.
Locating a Good Value
With a stock, you know within a couple of cents what you can purchase your shares at. By comparison, the bid and ask prices of a rare coin can be light years apart. It is all about locating a good value and trying to receive the best price.
Locating the best value can be tricky when buying rare coins. While finding underpriced assets is a good part of the challenge, the other side is determining what the outlook is for your chosen assets over the foreseeable future.
Effects on Valuation
There is no sure way to know if your rare coin collection will appreciate over the short or long-term. All we can do is focus on historical trends and pay attention to some of the variables that will likely affect their values moving forward.
Economic variables include stock price valuations and macroeconomic dynamics. There are political variables to consider, such as changes in fiscal policy or tax code. Then there are harder to quantify variables. The biggest is trying to determine a winner in the battle between the bulls and bears going on over at the stock exchange.
What we do know is that stocks are somewhat overvalued compared to their historical price-to-earnings ratio. An anticipated correction in stock prices is increasing fear among savvy investors who are already taking profits. While the masses are greedily chasing the gains that occurred through the spring and early summer, the analytical investors are turning to cash and alternative investments. This loss of liquidity was already evident in the August stock downturn that brought stocks back from record highs.
Those who seek stability are beginning to move their funds into some hard assets. While bullion is subject to the wild swings of the commodities exchange, the value of rare coins is more stable. This stability is what is causing more people to embrace buying rare coins as a way to enhance their own personal assets.
The act of buying rare coins can be risky if you are unfamiliar with the process for determining values and identifying opportunities for purchasing them at a fair value. To mitigate this risk, the leading rare coin dealers provide information on how to correctly determine the value as well as insight on where they believe prices are heading. By paying attention to their publications, you can see that there are indeed opportunities for getting into the practice at what could be a discount from their actual value. Buying rare coins can be made much safer once you follow the research and pay attention to the guidelines for making the right purchases.
In addition to buying rare coins at the right time and price, it helps to know how long to hold the assets. In general, rare coin ownership should be considered a long-term activity. There could be certain costs related to the transaction, albeit small in comparison. Additionally, many rare coins achieve substantial increases in value over a number of years. It takes some discipline and insight to the trade to know how long to keep your collection as well as accepting a good offer from another investor who values one of your prized coins. This year could be one of the best so far for getting in at the right price.