There are several fundamentals to grasp when it comes to investing rare coins.
The first point to make is that if you invest in some rare coins with the belief that it is an investment that is virtually free of the sort of risks and market downturns that precious metals and plenty of other investment vehicles for that matter, tend to experience, you will will probably be in for an unpleasant shock.
There is more than a grain of truth in the popular opinion that rare coin investments are typically more stable than some other types of investments and there is also some confidence to be gained from the fact that the performance of rare coins is not so closely reflective of the economy as stocks and bonds can be, but there are fluctuations and investing in rare coins should never be viewed as one-way investment.
A benchmark in the market
if you go back to the 1989 downturn, you will find what is effectively a line drawn in the sand when it comes to rare coin prices.
At this point in history, the rare coin market was losing value at what could be considered quite an alarming rate and if you were an investor at that point in time, you would most definitely have disagreed with anyone who had previously stated that this was an investment market which the bottom could not have dropped out of.
The CU3000 Numismatic Coin Index, which is used to measure the value of rare coins took a full six years to find the bottom from that point and only since 1995 has the trajectory been upward from that 1989 point.
The professional coin grading service publishes an index of the top risers and fallers over a variety of different periods and this will give you a good feel of how the market is behaving and performing over time. You will instantly see that there are some spectacular risers and some equally spectacular fallers. Further evidence of the potential volatility that you should expect from rare coin investing, despite what you might have heard previously.
It should also be noted that there are coins that are not measured by the index and the majority of these have been able to demonstrate an upward trend in terms of prices, over the last couple of decades.
Two distinct forms of rare coin investing
A number of investors will probably consider that the market predominantly consists of coins which have not been in circulation for many years, hence the rarity.
The actual market makeup is somewhat different to that perception and this is only one small section of the coins that are being traded.
If you are buying rare coins which are old, these coins are referred to as numismatic rare coins, but it is bullion rare coin investing which is the more dominant investment strategy for many investors.
Bullion coins consist of a high concentration of rare metals, which is invariably gold, and this means that their price is often more closely tied to the price per ounce of gold rather than any other index.
Bullion rare coins are generally considered to be one of the safest investments on the market and this is where the overall perception of the rare coin market comes from, so you need to understand the different forms of rare coin investing, if you havn’t already go this point.
The market for numismatic rare coins is much tougher to quantify, as it covers such a wide variety of coins within that term.
These type of coins should probably be viewed as a niche investment strategy and if you are looking for high-growth strategy involving rare coins, it is probably the bullion rare coins which will give you less sleepless nights.
In conclusion, you could probably characterize the rare coin market by saying that it has moments in history where it tends to leap forward and then prices stabilize for a number of years, so if you could predict when the next spike was due, it might turn out to be a profitable investment to hold onto.