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A Hedge Against the Broader Market

The Benefits of Investing in Rare Coins

When you think of investing odds are you immediately turn to one of two things, the stock market more or your 401(k). While those are the most known and can make you money, there are more than just those investment vehicles that can make you money. Recently you may have seen a spike in sports card or Pokémon card investing. The idea is you store your money in a place that will appreciate.

A hobby that has been around for quite some time is coin collecting and investing. Rare coins can be anything from a misprint to a century old coin. Investing in coins continues to be a strong place to find investing returns. We will explain below some of the benefits.

A Hedge Against the Broader Market

The first benefit is a hedge against the broader market. Diversification is always front of mind for investors. Being able to remove portfolio impact from market fluctuations is ideal. For example, should the market retrace 20% over the next few months, the value of your coins will likely remain the same.

Now, if you want to liquidate you may run into a thinner market. However, if you take your time and are patient, you can almost always get fair value for your rare coins.

Tax Advantages

If there is anything to know about investors is, they love finding tax loopholes. A well-known benefit to rare coins is exemptions from sales tax. Additionally, you do not need to pay any tax on increased value unless it is sold. If you are strictly looking for a store of value that tends to appreciate over time, then rare coins are an excellent spot to explore.

Below is a chart of the Knight Luxury Investing Index (KFLII) divided out by performance of asset classes.




As you can see, coins have done extremely well over the last 10 years and 12 months, respectively. Only being outperformed by rare whisky, you can see that coins hold and appreciate value with a healthy amount of certainty.

Liquidity

Lastly, when you invest in rare coins you have the benefit of liquidity. Unlike other investments that may struggle to find a market, people are always buying and selling rare coins. This means if you want to buy low and sell a few years later, you can do that with certainty.

Also, as the years progress the amount of coins and currency available will continue to decrease and make your holdings more desirable.

When you think of investing, take a minute to step away from the traditional vehicles. You can typically find returns elsewhere that give you an appreciating asset and provide market diversification. Things to consider when looking for coins are certified graded coins by professional grading companies, population, and rarity. An added bonus are may older and rare coins were minted using silver and gold.

Knight Frank is a wonderful website to help you see where coins rank in returns and if they would be a solid fit for your portfolio.

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