Monday, 13 May 2013

Alternative Investments: My first foray into collecting coins

Followers who read this blog on a regular basis know know that my approach to investments is fairly conservative and unimaginative.  I have typically spurned investment classes such as art, gold and have even written a post before on a mail order coin scheme which I considered to be a scam.

Therefore it may come as a bit of a surprise to some to hear that I have bought my first collectible coin set.  I have been looking into this area for a while and have probably over-researched it compared to how much capital I am actually going to allocate to this strategy.  I have set out my investment criteria and what I am seeking to do below.

Why have I diversified into collectibles?

There are two real reasons I have started investing in coins.  The first is investment related and the second is personal:
  1. It allows me to further diversify my investment portfolio
    • Although it is never going to be a large part of my investment portfolio, investing in products which are uncorrelated with all of my other investments provides a form of investment diversification and so reduces the risk of my portfolio
    • I have been complaining for a while that it has been hard to find good value in any of my existing investment classes - that is real estate, shares and fixed interest
  2. I am fascinated by coins and the history of money
    • I don't think you can collect an item properly without having some intrinsic interest in it - it allows you to read about the product without feeling like it is a job or a chore
      • I recently took a holiday and went to Canberra (the capital city of Australia) on a road trip.  While there I visited the Mint and spent a few hours just wandering around enjoying it
      • If you can't enjoy collecting a product you have to question whether it is right for you.  For example I would find it quite hard to become a serious art collector because I do not like it enough.
    • I personally find coins and stamps fascinating.  I will do a post soon on why I chose coins over stamps but it largely comes down to the longevity of coins
How much am I investing collectible coins

This will not become a major part of my investment portfolio.  Indeed I have committed such a small part of portfolio to it that I will not be breaking out in my expenditure tracker for the time being.  I believe that the best way to treat collections such as this, unless you are willing to commit serious time to it, is to think of it as a hobby which has the potential to appreciate in value.

To that end I will be looking to spend ~$50 a month on building up my collectible coin collection.  The best thing about coins is that you can generally invest these small amounts and slowly build up a very interesting collection!

What coins am I investing in?

If you go to numismatic websites you will see that there are so many avenues that you can go down to collect coins, some of which require a lot more effort than others.  Like most of my investments - I will be keeping my style simple and easy:
  • I will only be buying Australian coins 
  • I will only buy mint condition coins
    • It is possible to make money from old and rare coins but I have no idea how to find these or know if they are good value
  • I will not buy special edition coins which have no circulating equivalent 
    • i.e. I will be buying uncirculated and proof collections of circulating coins
The best thing about my conditions above is that I can buy coins which adhere to all these principles from the Royal Australian Mint.  They charge a premium over the face value of the coins but hopefully in time these coins will appreciate in value past this premium value.  Looking at sale values on coin dealer websites suggests that this is the case.

Do you collect anything for pleasure or profit?  How have you found the returns from them?

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