Investing is always a good idea. Where people go wrong is to confuse investing with gambling and the near certainty of loss that goes with that pursuit. Investing is a long game and gambling is a short one. The choice of outcomes is: get rich slow or get poor fast, and many take the latter route because investing is just too slow and boring.
In the new reality of low interest rates, investing has become an even harder game to win because all profits are connected by the logic of risk and measured against what a government will pay out on its ultra-safe bonds—and that is so low that more risky returns are in turn suppressed. But the more difficult it becomes to make money, the more interesting the further reaches of the investment landscape become.
Alternative investments are the far outpost of sensible investing, and amongst them art and collectibles stand out. These are “hard assets”: inflation doesn’t eat into their value so, fashion aside, collectibles offer a way to protect wealth against the ravages of monetary devaluation. Prices rise and even a slow pace of inflation brings in the overwhelming force of compounding that makes small numbers large over time.
The main two categories for collectibles are coins and stamps, with coin collecting going back into antiquity. Roman Emperors not only minted coins, they collected them from their own version of antiquity, the Greek period.
Since their inception, coins have been beautiful things: miniature sculptures, part art, part historical artefact. They are stories of their context and time and their desirability causes their value to appreciate. Coins can sell for millions; only fine art trumps them as an asset class. However, investing is a game of skill and nowhere more than in collectibles. If you are not interested in coins, investing in them will be more problematic than investing in something that you enjoy learning about.
Broadly there are three categories of coin collecting. The first is collecting ancient coins, where Greek and Roman coins are the main categories. Then there is collecting coins of a particular country. Finally there is gold. Nothing gets the blood racing faster for collectors, new or experienced, than a big gold coin. Collecting gold coins is not cheap, but once you’ve held a five-guinea piece the allure of gold never leaves.
Most non-collectors have no idea that an ancient Roman coin might not be valuable. Most expect such a treasure to sell for thousands and are surprised to find a grab bag of dozens of crusty old Roman “grots” for a few pounds. This underlines a couple of points. First, getting started does not require a serious financial commitment and will yield a dividend in pleasure. Second, to have real value a coin must be in extremely good condition.
"The harder it is to make money, the more interesting the further reaches of the investment landscape become"The value drops fast if its condition is not in high grade. “If it is not UNC it’s junk,” the saying goes, which means that if the coin is not in mint condition (uncirculated) it is not worth much. The golden rule is that unless a coin is in lovely condition, do not buy it. It is better to buy one perfect coin a year for £1,200 than 12 lower-quality ones for £100 each.
Knowing the right price to pay is also crucial. A catalogue is released every year, but nothing beats auctions for accurate pricing information. Baldwin’s and Spink are the main houses in the UK and the prices paid in their salerooms give everyone a solid steer on value.
Auction results also prove that the price of coins goes up massively over time. You can get auction catalogues from the interwar years and see that coins have appreciated 200 to 1,000 times in value. This is shocking until you realise that you could buy a house for £200 in those days too.
Coins are things of beauty as well as being hard assets with a long and proven history of appreciation. If you buy the best, in the long run you will, at the very least, protect part of your savings against inflation. You will also gain an element of diversification by holding an asset whose price moves independently of other investments, such as shares and bonds, and that generally does well when things are going badly. And on top of that you will also share in the pleasure that collectors gain from their collections—a dividend paid in pleasure.
