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Four fabulous advantages of investing in collectible coins

by , 10 July 2013

The biggest blights to investment performance, besides the initial costs, is annual costs and fees. But if you buy gold in the form of coins, like Kruggerrands, there are no annual costs, no management fees and no performance bonuses. Read on to discover four reasons why you should include gold coins in your portfolio…

When the gold price goes up, rare coins follow. And, eventually, they go up much more than gold.

Over the years, this has provided an early warning signal of impending bull markets and produced windfall profits for knowledgeable investors.

But unlike normal gold bullion coins, reliable, independent reports show that average annual returns on rare coins have historically been more than 300% greater than the returns on gold bullion.

Four important advantages of coin collecting

Here are four important advantages of rare collectible coin investments, as The South African Investor research team explains:

1. Liquidity
Rare coins are the most liquid of all collectibles. Since 1963, the Coin Dealer Newsletter has published weekly dealer-to-dealer pricing information for all important US coins.

So what can you expect from the rare coin market in terms of liquidity? Well, when the time comes to sell your coins, you can expect (and receive) immediate payment.

2. Diminishing supply
This is a subtle, yet very important, investment advantage. The supply of collectible coins diminishes daily. Not only are they not making any more $20 Saint-Gaudens, Buffalo nickels, Walking Liberty halves, Morgan silver dollars, etc., but the available supply is constantly diminishing as a result of meltings, abuse, neglect, etc.

The advantage of this is twofold.

First, any increase in demand makes price increases inevitable. You can’t increase the supply of coins to meet new demand. The only way demand can be satisfied is with higher prices.

Second, a limited supply reduces the downside risk. As prices come down, production gluts (as in the oil market) don’t depress prices further and hinder a price recovery. In fact, in the coin investment market, low prices tend to drive coins off the market.

3. Affordability
A collectible painting can cost thousands of rands or more. Rare collectible coins seldom cost more than R500,000 – (and they’re generally for imported, top quality coins). Top-of-the-line art, diamonds and real estate all demand very large amounts of money for the purchase of a single item. But most coin investments are in the R10,000 to R100,000 price range.

In terms of affordability, this means you can expect to participate no matter what your investment budget is.

4. Favourable tax treatment
This is a seldom talked about (but significant) advantage of coin investing. According to SA Coins, South African rare coins aren’t taxable on their sale. That means there’s no CGT (Capital Gains Tax) payable on profits when you sell. And you can’t be taxed on the profits that you earn from investing in them. But be warned: Krugerrands do attract CGT.

There you have it, four reasons why you should include rare coins in your investment portfolio.

Four fabulous advantages of investing in collectible coins
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