This beautiful denarius of Domitian (AD 81-96) was sold in a 1988 CNG auction for $407, including fees. I bought it from an auction in December 2017 for $97, including fees. Are coins a good investment?
Question: What is the best way to make a small fortune in coins?
Answer: Start with a large fortune. [A well-known joke with more than a grain of truth.]
Seriously, you might have heard coin prices go up and wonder if coins would make a good investment. Here are some facts you need to know.
Reports on coin prices are almost always biased because they don't discuss typical coins, but usually select only coins that have gone up. Why would a dealer or coin newspaper emphasize coins that have gone down? Any report you see about coin prices in a source like the Wall Street Journal is usually badly wrong for reasons explained below.
Those who wish to sell coins to you will tell you that prices have gone up and can point to many examples. However, that is with the benefit of hindsight and selection of outliers.
It is easy to make any investment category look good. For example, consider an investment firm that says that 80% of their mutual funds beat the market ten-year average. That sounds remarkably good, doesn't it? However, it's really quite easy. Start with 20 funds ten years ago of which four beat the market. Be sure to close and discontinue the worst 15 before they get to be 10 years old. So, among the five that actually still exist to have a ten-year record, four of five beat the market: 80%. (Don't mention the other fifteen funds that your firm no longer has.)
This is also how coin-value reporting works. If you looked at which coins were recommended ten or twenty years ago and checked out the change in value, you would get a much different picture than if you look at what is desirable now. Many coins that you hear about now are coins that have gone up in the last ten years (which is why you hear about them. They don't publicize the ones that have gone down, and there are many). The coins that have gone up are not the same coins that were desirable and available then. That explains how reports on coin prices are misleading.
My local US-coin dealer has twice mentioned to me how 1909-SVDB cents used to be in demand and he could sell them as soon as he got them, but now "every dealer has a dozen" and they are not in much demand. Do you expect Coin World to write an article to that effect? But every issue of Coin World finds some record-high prices to report. (But not of coins you would have bought ten or twenty years ago.)
Furthermore, even if you could pick coins that will go up (and you probably can't), it costs at least 30% comission to sell coins, so they would need to go up a lot before you saw the first penny of profit.
(The rest refers to ancient coins.)
Written in 2018: If you think coins have gone up since you started collecting, consider the possibility that your standards have gone up and that is the true cause of the perception of rising prices. The quality of a coin bought when you were a beginner is no longer as pleasing as it once was, so you now need to pay more to get a coin you like. I submit that usually the increase in cost of desirable coins is actually the cost of higher quality, not a true increase in prices. (Inflation can also be a factor if you compare to prices from very long ago.) [Comment, November 4, 2020: Some prices of excellent coins have gone up substantially during the Covid-19 crisis. It seems that collectors are spending more on their collections; whether this effect will persist is uncertain.]
Another big factor for investment is availability. If you think a stock is going to go up, you can buy as much as you want of it. There is nothing comparable for ancient coins. I can think of at least two types I bought that I thought were undervalued and would go up, but no more of them were on the market!
One piece of advice that has been offered for decades has some truth, if your goal is making money. (However, with coins, it should not be.) That is, buy very high quality coins. Not all top quality coins go up enough to make money (most don't), but only top quality coins go up enough to make money (some do). Long ago I thought that nicer coins already cost a lot more and that multiple would not get much higher. I was wrong. How can coins that are already expensive increase more than nice coins that cost much less?
Well-to-do people with high incomes are doing very well and, if they collect, they tend to want only the best. That drives those prices up and leaves a very large number of coins for the rest of the collectors.
I remember thinking decades ago that EF coins cost a lot more than VF coins that had most of the details, so why not buy three VF instead of one EF? Well, I still support that reasoning because I am in it for the love of history and knowledge, but financially it was incorrect. Most of the VF coins cost the same in dollars and the EF coins have gone up.
On the other hand, an inexpensive coin can give you a great deal of pleasure for thirty years. The internet has made ancient coins much more available, increasing the supply side of the equation. Maybe that effect is fully factored in and in the future coins will track inflation. Maybe they will go up (and maybe not). Regardless, treat collecting as a hobby to enrich the mind, if not the wallet, and it pays off well enough.
Details. Inspection of old fixed-price lists and auction-sale-catalog prices realized shows the vast majority of ancient coins have not beat inflation and certainly not enough to overcome a buyer's fee, seller's fee, and shipping expenses. Many coins offered in the 1980s and 1990s have not even gone up in nominal dollars, much less beat inflation. Many times recently I have seen coins with citations to old auctions. When I look them up I often find they sell for less now than they did then--sometimes much less. Here is one of many examples:
This beautiful denarius of Domitian (AD 81-96) was sold in a 1988 CNG auction for $407, including fees. I bought it from an auction in December 2017 for $97, including fees.
Coins--even expensive coins--do not always go up. This case is much more dramatic than most, but keep in mind that someone thought it was worth $407 thirty years ago, and it is not even worth that now!
The current retail dollar value of the majority of coins that retailed for, say, $40 thirty or twenty or ten years ago is--wait for it--about $40. Factor in inflation and that is a big percentage loss. Plus the dealer you sell to won't give you anywhere near $40. Only the very highest quality coins have gone up. For example, a EF+ Aurelian that cost $20 in the 1980s might be worth much more today. But most cheap coins have not gone up relative to inflation; they have not gone up at all. You can buy a VF+ Probus, or EF Constantine, or a nice aEF Septimius Severus for no more than what they cost 20-30-40 years ago.
Some series have gone up, but not as much as inflation. Common Republican denarii were half today's prices decades ago. Of course, there are some exceptional coin types that have done very well. A Cleopatra portrait piece from Alexandria, even in just F, is one--but it would have been hard to find one. You probably have some other winners in mind. You may have recently bought some coin you know has gone up a lot since you started collecting. But don't think that the ones that have gone up well-represent the whole market since the 1980s and 1990s. They don't. Maybe the reason is the great increase in supply because of the internet. Maybe that is now fully factored into prices. Maybe, from now on, coin prices will keep up with inflation. Maybe.
The ConsumerPriceIndex.pdf for comparing values of coins in 2022 to their values in the past.
Posted Feb. 12, 2018, with modifications of my CoinTalk posts from April 26, 2016 and June 1, 2017. Short comment added Nov. 4, 2020. Link added April 13, 2022. Minor revision Nov. 6, 2022. Made a minor addition about "availability," Nov. 17, 2024.