How to Buy Rare Coins, Art, and Collectibles
This idea is for anyone interested in investing in "real stuff," like gold coins, art, and collectibles.
These hard assets can provide a layer of diversification and inflation protection you can't get from traditional paper investments like stocks, bonds, and ETFs... But they can also be confusing for new investors.
So we sat down with our favorite expert on "real stuff," Van Simmons, to talk about the things new investors must know before buying. Van is the president of David Hall Rare Coins and is one of the most knowledgeable minds in the world on coins, stamps, and just about any other collectible you can think of.
If you've ever considered investing in these rare items but didn't know where to begin, read on...
Stansberry Research: What are the benefits of adding rare coins, art, and collectibles to your investment portfolio?
Simmons: Coins, art, and other rare collectibles have several benefits.
First, they're somewhat of an island of safety from currency fluctuations. In other words, their intrinsic value and desirability are not dependent on what's going on with the dollar, the euro, or any other individual currencies.
They're also saleable almost any place on earth in a wide range of currencies, as opposed to many traditional assets that are denominated in dollars or a particular currency.
A second benefit is anonymity. These assets are a way to hold some of your wealth without Forbes knowing how wealthy you are. Things like real estate, stocks, and bonds, can be easily tracked. On the other hand, owning assets like rare coins and art is a way of taking your wealth out of view of almost anyone who wants to know what you own.
Finally, unlike most other investments, these are things that you can actually enjoy. When you invest in a piece of art, you can hang it on your wall and appreciate it every day. You can buy a rare coin, hold it in your hand, and enjoy the history of it. My business partner David Hall has always said that rare coins are literally "history in your hands."
Stansberry Research: Are there any keys to successfully investing in these rare assets?
Simmons: There are four big ideas that apply to investing in any of these assets.
First, and probably most important, you need to find a dealer who's honest and is going to treat you fairly.
One thing to look for is a dealer who offers a buy/sell spread and will guarantee to buy a product back. I don't care if it's rare coins, Tiffany lamps, Galle glass, Martin Brothers' pottery, California art, or whatever else... in this business, reputable dealers will agree to buy their products back and tell you exactly what they'll pay for it.
Of course, many dealers will say, "Gee, I'm sorry, we don't buy stuff back." What that usually means is they overcharged you so badly to begin with, they don't want to tell you what they're actually willing to pay you now...
Stansberry Research: Do you have any suggestions on how to find a reputable dealer?
Simmons: It really does depend on the market. You can start by talking with and asking questions to a lot of dealers.
You can join clubs in that particular industry and attend events. When you talk to members, inevitably there'll be one or two names that pop up as the most popular dealers.
There are also a million books and websites dedicated to these topics now that can give you a better understanding of your particular market and help you find a dealer you can trust.
If you do your homework – and if you learn what is important and what isn't, or what has value and what doesn't – it makes it hard for a dealer and other collectors to take advantage of you.
In general, it's almost always better to try and work with a dealer who owns a business, as opposed to a salesman. If you deal with the people who own the business, you're dealing with somebody who has a reputation at stake.
There's a reason that I've kept clients for 25 or 30 years... It's because as a business owner, you try to do the best job you can do. If you're dealing with one of the principals of the business, it usually limits your risk. More often than not, they're going to do what's in the client's best interest, because that's in their long-term best interest, also.
Stansberry Research: Fair enough. What's the next "big idea"?
Simmons: The second is, you generally want to avoid buying any of these items that are relatively new, whether it's a commemorative plate or a coin that may have just been struck from the Franklin Mint... just about anything that is brand new.
It usually takes 40 or 50 years for something to become a true collectible. So it's a gamble to buy something today hoping in 40 or 50 years it's going to become desirable. There's simply no way to know what's going to be popular 50 years from now.
You're much better off buying something that has a long track record... that has already been a popular collectible for many decades and has a large, well-established collector base. The more popular and the bigger the collector base, generally the more liquid the market is and the better the price will be when you decide you would like to sell.
Of course, these are general guidelines. I've also collected items like old pocket knives where the market is very small – or thinly-traded. But these markets take a little more time and effort to navigate successfully.
Third, you want to buy these items when prices may not have seen much movement for a period of time, or if the market corrects significantly and leaves prices too low.
Like in other markets, these are the times when you're most likely to find items trading at great values. Of course, the hardest thing to do is buy in a bear market. It's not easy to be a contrarian and buy when things are cheap and undervalued... but that's one of the keys to big returns. When you buy a great asset at a great value your chances of success go up exponentially.
Finally – and this is a bit different than some other investments – buy what you like. If you buy an item because it's beautiful, in great condition, and you really like it, chances are, somebody else will like it for similar reason. So there's an added dimension you don't find in many other assets.
These are the big ideas that investors should focus on, whether they're interested in the most popular items, like rare coins, art, and stamps, or any of the more obscure items, like antique firearms, Navajo rugs, or even pocket knives.
Stansberry Research: Let's talk about the big markets in a little more detail. Are there any additional ideas folks should know about investing in rare coins specifically?
Simmons: In the rare coin market – like many other collectibles – another big consideration is condition and grading. You want to buy coins that are graded by a third-party grading service.
I only sell PCGS [Professional Coin Grading Service] coins. Granted, I'm very biased because I helped found the company. But the point is, in most cases, PCGS coins sell for the most money. There's a reason a coin graded by PCGS will sell for $20,000 and a similar coin graded by another company will sell for $10,000 to $15,000 in the same grade.
So you have to buy something that's authentic and correctly evaluated and graded. In the coin market, you don't want to end up with something that's been doctored, tooled, re-toned, or anything else. You want a coin that some third-party authentication group has looked at, verified as being in the correct condition, and will stand behind with a money-back guarantee.
Generally speaking, the better the condition and the rarer the coin, the more the coin will be worth. In most cases, it's best to stay with higher-quality items. If you aren't able to afford a particular high-quality rare coin, it's usually better to consider a different coin than to buy one of lower-quality.
Of course, the very rare items often can't be found in a high grades, and ultra-rarities are almost always desirable, regardless of condition. For example, a 1795 $5 Small Eagle – the first U.S. gold coin ever made – has a lot of desirability and value in any grade.
Stansberry Research: Are there any other ideas that are particularly important for the art market?
Simmons: In art, you have to deal with a specialist. In paintings especially, you have to make sure what you're buying is authentic, because there are many counterfeits, and really good counterfeits at that. You only want to buy what you know is authentic.
In art, you also want to buy things that have eye appeal. Composition is a huge factor. If a painting is not composed correctly, even people who don't know anything about art can look and see that something's not quite right. So composition makes a big difference... and the era the art is from and the desirability of the artist is also very important.
There's actually a great website you can go to if you'd like to know the value of a particular piece of art. It's called AskArt.com. You can just log on and type in the artist's name and see what all their work has sold for in the last several years. They do require a subscription, but they offer one-day subscriptions if you just have one or two pieces and want to know what they're worth. It's pretty amazing.
Stansberry Research: Stamps are another "big" market. Are there any additional considerations with stamps?
Simmons: Like in rare coins, condition is very important in stamps. I was a big buyer of stamps about 10 years ago, and I would only buy stamps that were graded by PSE [Professional Stamp Experts].
In stamps, there are three basic grades: postmarked or canceled, hinged, and never hinged.
Postmarked has been run through a postage meter. Hinged means the stamp has been stuck to an envelope or a stamp book but may still be unused. In the old days, people would often lick a corner of their stamp and stick it in a stamp book. If a particular stamp has never been hinged, it can make five or 10 times the difference in price.
When you're buying stamps, you want to be sure they're well-printed, well-centered, and ideally never hinged. And with some exceptions, most stamps printed after World War I are not particularly rare or collectible.
Stansberry Research: Any parting thoughts?
Simmons: Don't try to fool yourself into thinking you know more than the dealer. You aren't going to go out and "steal" something from a dealer. By that I mean it's very difficult to find items that are so mispriced that you can go out and resell the item and make a 20% profit within a day or two.
We travel to coin shows constantly, and we are usually one of the first dealers to hit the trading floor. We'll look at thousands of coins on a given day... and at the end of the day, we may have found one or two coins that are cheaper than usual... where we could resell it to a dealer for a 20% or 30% profit the same day.
Most of the time, our focus is on trying to buy nice, high-quality items trading at fair market prices that can appreciate over the long term. If you do the same, and stick to dealers you trust, it's tough to go wrong.
Really great, high-quality items stay popular for decades and decades. People still collect 1886 Winchesters and Tiffany lamps, and I'm sure they will 100 years from now. Things like that aren't going to change.
Stansberry Research: Sounds good. Thanks for talking with us, Van.
Simmons: You're welcome.
Editor's Note: Van is happy to talk with interested Stansberry Research readers about making rare coin and collectible investments. You can reach him at 800-759-7575 or 949-567-1325, or via e-mail at email@example.com.
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