Rethinking Your Investment Portfolio, Thanks to Bernie Madoff
By Ken Smaltz
July 22, 2009
Given today's economic climate, all investors from the novice to the expert are rethinking and retooling their investment portfolios. Especially in today's tough economic times, balancing the breadth of your investments to include valuable coins is an extremely prudent idea.
In comparing coins to other investments, the corporeal nature of coins is appealing to many investors. The people who invested with Madoff only had account numbers to point to. They didn't know if Madoff bought what he said he did or sold what he said he did. That's the difference with coins. Coins are tangible assets. You hold them in your possession so you know they're real and you know their value. If you buy a coin from me, I deliver it to you. You hold on to it; you own it. Note that rare coins also are very liquid and can be sold back to the dealer over the phone sight unseen if in a certified holder..ie PCGS or NGC (Private third party grading services). Gold or silver (bullion) can be sold over the phone sight unseen also.
Another advantage of coins as investment is the fact that coins are the only form of investment that are mostly free of government regulation. If an investor buys a coin from a dealer, the purchaser is, at present, not required by law to report the transaction. Investors who are worried about government involvement in their purchases find this reassuring. Of course, when an investor sells at a profit, they must report that income to the IRS. But for however long the investor possesses the coin(s), it is a private asset.
Coin collecting tends to draw from a conservative base. With the economy so unstable lately, more and more people are concerned that the stimulus policies the government is undertaking will lead to more borrowing from foreign countries. Many investors feel that the U.S. will come to a point where the dollar is devalued to such a degree that it is almost worthless. There are two concerns at play in this type of scenario. First, that other countries will stop loaning money to the U.S. And, second, that the government would then be forced print more money thus leading to inflation. Investors want to put their money in commodities, and especially gold and silver, at a time like this because as inflation goes up, the value of precious metals also goes up. There are people in the industry who are banking on this inverse relationship. Some people have taken all their money and put it into gold and silver because they believe inflation will raise the value of these commodities. However, it is important to understand that precious metals differ from rare coins. In the event that inflation rises, people who put money into precious metals are investing in the metal content alone. The value of gold and silver tends to escalate sharply with inflation and so will the value of all coins simply based on the fact that they are made of precious metal. But rare coins are another type of investment that you should diversify your money into because of their rarity and the likelihood that they will appreciate over time.
Investors should get involved in purchasing rare coins to balance their portfolios. Coins can be purchased at prices anywhere from $25 to a million dollars a piece. Anyone can get involved in coin collecting and can get in at a low point. The serious investor should consider $2,500 to $3,000 and up as a starting investment. In starting at this level, investors can be assured of included some "key date" coins in their collection. Novice collectors should research and consider purchase of key date coins. Key date coins are the blue chip stocks of the coin world.
In time dealers may no longer be able to go amongst themselves in dealer networks to acquire rare coins. There may come a time that they can't get them because they are out among the masses. At that point, the dealers will be coming to you for their coins.
About Ken Smaltz
Ken Smaltz is a preeminent expert in the collection and integration of rare coins in balanced, responsible investing. Based in New York, he has been a rare coin expert for more than 25 years. He has been featured in More! Rags to Riches by Gail Liberman and Alan Lavine as well as in Crain's New York, Black Enterprise, Fortune Small Business and The Network Journal's "Top 40 Under 40" list. Ken advises private individuals and collectors on incorporating rare coins into their investment portfolios.