Investment or simple hobby?

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Investing in coins is actually an investment, but it is much more than that. You can also go into collecting rare collectibles, which can be a rewarding hobby.

There are two categories of coins that can be purchased as an investment or as a collectible. People tend to buy bullion coins for investment purposes and collectors usually buy numismatic coins to add to their collectibles.

Whether you’re an investor, collector, or just looking to uncover rare coins, here’s what you need to know to determine which coin is right for you.

The $10 Indian Head gold coin is highly collectible.

Bullion coins vs numismatic coins

Numismatic coins are bought and sold by investors for their rarity, metal purity and historical value. Their value is based on rarity, condition and collector demand.

Numismatic coins derive their value from the way they are minted, their historical value or their uniqueness in their category. This value can increase or decrease depending on demand.

Numismatic coins usually attract collectors who are willing to keep their coins for years so that the value of their coins increases. Besides being a long-term investment, numismatic coins can be an excellent collecting hobby.

The bullion market, on the other hand, is much larger and there are more investments in this category. As a result, there is more liquidity in the gold market. Bullion coin investors around the world can easily buy and sell their gold or silver coins.

If you are not very concerned about collection but are more interested in a safe-haven asset to diversify your investment portfolio in an uncertain market environment, buying bullion coins may be a better option.

3 reasons to invest in coins

1. Coins provide inflation protection

Investing in coins is a great way to combat the risk of rising inflation. Inflation is the rate of increase in the prices of goods and services over time. It’s a sad fact that things in the economy are getting more expensive, where the cost of living for the average consumer is going up.

small dollar

The effect of inflation is that the value of each dollar (or monetary unit) decreases.

To cope with the depreciation of your money, you must invest to build up your wealth and increase your purchasing power. One way to do this is to invest in physical coins.

While it may not be the best hedge against inflation under all circumstances, physical gold coins have been the traditional safe-haven asset to beat or keep pace with inflation. This means that if you are just holding cash, without having invested it in an inflation hedge, your cash will lose value (purchasing power). Investors can hold onto physical coins which can help maintain the value of your investments even if inflation persists.

2. Coins Have Intrinsic Value

The characteristic that makes coins a valuable asset is that they are a physical asset. As such, coins have intrinsic value. In other words, they are an asset that has value in itself.

For example, gold and silver have intrinsic value because they are commodities that can be converted into other goods. These are metals that can be used as components in the manufacturing process of goods. These factors explain why gold and silver coins have market value.

Coins and physical assets have intrinsic value due to their natural properties. Due to its physical composition, gold is malleable, durable and transportable. These qualities make gold useful in various ways.

Gold as a physical asset is also rare, making it a sought-after metal. It is also an attractive metal that is used for aesthetics like jewelry and luxury goods. There are many use cases for the physical precious metals. All of these characteristics make physical metals a solid store of value.

3. Coins are great portfolio diversifiers

Coins and physical assets are a useful way to diversify your investment portfolio. This is especially true during times of economic and market turbulence.

There is a lot of uncertainty in the stock market right now. The economy is experiencing the highest levels of inflation in more than 40 years, and the Federal Reserve is stepping in to raise interest rates in response. Add to that the war between Russia and Ukraine and there are many things that cause short-term market volatility.

flash stock market crash

Investors understandably worry when broader markets experience turbulence.

With the S&P 500 down more than 16% since the start of 2022, investors are worried if there is even more room for stocks to fall. This is why having a diversified portfolio that includes uncorrelated assets like coins can be a useful option for investors.

The investment performance of coins and physical assets is not correlated to the performance of traditional investments like stocks and bonds. This makes it an important asset class to consider. Adding uncorrelated assets into the same portfolio helps reduce overall portfolio risk, especially in market conditions where there is a lot of uncertainty.

3 tips/strategies for investing in coins

1. Properly store your coins

Physical assets must be stored correctly. You must first determine whether you want to keep your physical coins at home, in a bank vault, or in a third-party storage facility.

You may think it’s easier to keep your coins at home, but there’s some management that comes with holding coins, so the responsibility lies with you. If you choose to keep your physical coins at home, be sure to store them in a place that you will remember and that will be accessible in case you need to retrieve them in an emergency. Make sure your storage location is fireproof, won’t cause water damage, and that you keep passwords and security keys where parts can be stored safely.

You may pay administrative fees to a third party such as a custodian to hold your coins. Precious metals custodians offer a high level of security, so investors can be sure that their assets are safe. With custodians, the other level of protection is keeping records of their accounts. This logs the storage of your assets to keep track of them and prevent loss.

Finally, keeping your parts with a third party adds a layer of insurance. Custodians have insurance policies that state that if your property is lost, you will be reimbursed for any theft or damage. Insurance policies reassure the investor that you can trust a precious metals custodian.

2. Manage Coin Investment Costs

Gold coins have a higher premium over the spot price of gold bullion due to additional mining costs. Also, keep in mind that to effectively manage your physical coins, there are certain costs to consider.

Some fees to consider when managing coins and physical assets include storage and management fees, insurance, and other costs. Taking these expenses into account, it could reach up to 15% of your investment, which can seem like a problem when you are trying to make money from this investment.

3. Store parts for the long term

When investing in coins, you should be aware that it is a long-term type of investment and one to hold. Since physical coins cannot be easily bought and sold on the market like shares of a company, investors should keep in mind that they are investing in an illiquid asset. It’s not necessarily negative, it’s just the nature of investing in coins.

Physical precious metal coins are reliable investments and have stood the test of time in good and poor economic environments. That said, coins can hold their value and even increase in the long run as long as you don’t sell them prematurely.

Due to their small size, coins are easier to store than physical gold or silver bars. On the other hand, bars are more space efficient per unit weight for storage. So there are trade-offs between the two forms of ingots.

3 coins to invest in

gold coins

Gold coins are one of the most popular types of coin investments. You can buy gold coins through dealers or individual sellers, and purchases can even be made online. When it comes to owning gold, gold coins are the most popular option among investors.

You can get your pieces in different sizes, with various designs, finishes and origins. There are different combinations of gold coins or collectibles to choose from depending on your budget and investment goals.

Buy gold coins from Gainesville Coins by following the link.

Silver coins

One of the advantages of silver is that it is less expensive than gold and offers many similar benefits to an investment in gold. Investing in silver coins is a popular way to gain exposure to the precious metal.

Silver coins are used as a medium of exchange in the United States. 90% of silver coins were used for money in the United States as recently as the 1960s.

silver gold american eagle

Gold and silver coins manufactured by the United States Mint.

Silver is a commodity and many investors turn to commodities during times of high inflation, when the market is down and when there is a downturn in the economy. All of these events are currently present, which could make this a good time to place your Silver Coin bet.

Buy silver coins from Gainesville Coins by following the link.

Platinum Coins

Although platinum coins do not come to mind immediately when compared to gold or silver coins, they have become very popular among precious metal investors. Gold and silver have been around for a while and have gained market confidence, but platinum has many valuable properties that make it a strong contender.

Platinum is a rare metal used in a variety of different industries. Platinum coins can be a great way for gold and silver investors to diversify. Platinum is rare and in high demand, making it a valuable precious metal. It also has a wide range of industrial uses.

Written by Paulina Likos


Learn more about investing in coins and collecting coins from the numismatic experts at Gainesville Coins:

How to sell your coin collection

Key date coins: definition and examples

Top 20 rare coins sought after by collectors

Modern quarters are worth the money: prices and collection tips

No Date Buffalo Nickels: How to Find Their Value

1982 Bronze and Clad Lincoln Cent Guide

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