Coin Collecting A Hobby or Investment

Silver Coin (Photo credit: migraines2000)

When you have been investing for a while it sometimes gets a little boring. You may have an automatic deduction from your salary that goes directly into your 401(k). You have set up your accounts and your on auto pilot. Your doing well, your accounts are diversified, and your on track. You have been thinking about adding a little excitement to your investing world. You have already tried investing in individual stocks but you have learned the volatility and risk are just not for you. Maybe collecting gold and silver coins may be just the thing that can satisfy as a hobby and also as an investment.

People who begin to buy gold and silver coins need to determine how much is a hobby and how much is an investment. Or maybe it’s a little bit of both. Coins are very different as a type of investment compared to stocks and bonds. Investing in coins does not produce interest or dividends. Their value comes from the scarcity of supply and the demand from collectors. Besides the value of the gold or silver the coin is made of there is a value to the coin from the historical and art perspective.

Whether it’s because of increased scarcity or inflation, over time coins usually increase in value. There are also temporary increases in value for coins when banks and sovereign nations issue new coins. As the price of gold and silver rises so does the value of coins. Gold and silver coins due have price fluctuations but they are never as bad as the declines we have seen in the stock market over the last few years.

During the 1990’s the price of coins did not keep up with the performance of the stock market. Many collectors sold their coins to pursue greater stock market gains. Those were coin investors and not coin collectors. Coin collector’s were pleased with this decline because they could purchase more coins for their collections at bargain prices. When the mid 2000’s came, the stock market saw a steep decline. At the same time, coins were sold at record prices.

Over the last generation more people in the U.S. and the West have started to see gold and silver coins not just as a collectible but as an investment. Some financial advisors have begun to recommended a ten percent stake in coins as a viable part of a diversified investment portfolio. When coins grow in value they often show better returns than a stock portfolio.

As with all forms of investing there is risk. Financial advisers agree that the average person should not be heavily invested in coins and only treat gold and silver coin collecting as a hobby. They recommend to proceed with caution and only after much education and professional direction in coin investing. Coins are not necessarily treated as a commodity and there are differences in determining their grade and value so it’s important proceed carefully with investing. If you want to invest in gold and silver as a commodity it’s best to consult the knowledgeable people at  BullionVault Silver for ways to do it right.