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MY FATHER, WHO DIED in 2007, collected coins in a haphazard fashion through the 1970s, ’80s and ’90s. I believe he did this in the hope they’d appreciate significantly in value. In other words, he did it as an investment, not as a coin collector pursuing a hobby.
I’ve now been assigned the family task of “seeing what we can get” for Dad’s coins. As an investor in the stock market, I’m curious: Did my father’s efforts pay off—or would he have been better off putting the money into stocks?
My own bias is to invest in the stock market because it’s liquid and has historically provided handsome growth, while hard assets like coins and other collectibles aren’t as liquid. Because of this belief, I’ve not done any collectible investing. But maybe collectibles do provide decent returns if you hold them for long enough. Now, I had the chance to do a real-world test.
Here’s a snapshot of Dad’s collection:
My plan was to bring the collection to dealers to get quotes. But first, to be sure I’d get something like fair value, I created a spreadsheet listing all the coins and my estimate of their value. I hoped, of course, to find that rare 1955 doubled die penny worth north of $10,000. But, alas, there was no super coin in the set. My spreadsheet showed the collection was worth about $5,000 at retail. What this means wholesale I’ll find out as I shop the set among dealers.
Some interesting facts about the collection:
Did my dad do better than the stock market with these coin purchases? To test this question, I made some assumptions:
Would $500 invested in the stock market in 1985 be worth more or less today than $5,000? There have been some four decades for the $500 to grow. The result of four decades of stock market growth, with shares doubling each decade, can be found with this calculation: 2 x 2 x 2 x 2. That gives us 16-fold growth. If we multiply $500 by 16, we get $8,000.
Moreover, I’m likely being far too generous in my valuation of the coins. I recently went to two dealers and got quotes of $1,500 and $2,300 for the lot. The dealers said many of the U.S. coins were of the “spend it” variety, meaning they were merely worth their face value.
Bottom line: My dad’s $500 invested in the stock market might have returned $8,000, while his coin investments will yield at most $5,000. This analysis doesn’t mean you can’t do well investing in coins. But I believe you must treat the effort as a business and become knowledgeable about the subject. If you’re a casual investor using a buy-and-hold strategy, the stock market has proven to be a far better place to increase your wealth.
Bruce Roberts recently retired from IBM after a 35-year career as a software engineer. Degrees in math and computer science served him well during his career and when investing. In retirement, Bruce enjoys tennis, playing bridge and tutoring math.
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Bruce, greetings from a fellow IBM retiree. Your article may motivate me to pull out my box of old coins I collected in the 1960’s when I had a paper route for several years. I enjoyed sorting through the coins and pulling out ones that were particularly old or interesting. I think the oldest was an 1898 Mercury head dime. During that period I also collected (hoarded?) all of the silver half dollars I came across, Franklin and Kennedy coins mostly. Unfortunately, most of those I foolishly spent in my high school and college years. I never collected coins as an investment, just as a passing interest. Thanks again for your article and the memories it stirred.
Jerry, not be a stickler (OK, yes I am), but if you have a dime from 1898, it is a Barber style dime, not a Mercury. Unless it has an ‘O’ or ‘S’ mint mark and is in great condition, it is not particularly valuable.
I had a similar experience with my parents’ 60-odd silver dollars. The first thing I was told by a dealer was that every family in America seems to have a small hoard of silver dollars and thinks they are valuable. They are usually wrong. Most silver dollars are too worn, or aren’t that rare. You can buy nice shiny silver dollars in good condition at some flea markets for $25, if all you want is a nice silver dollar. So a dealer would offer you less. I hate to tell you that even your modest estimate may be too high.
Ultimately, we followed most of the same steps that you did. Since there weren’t any hidden treasures, we chose another path. The five surviving children sat around a table with all the silver dollars spread out in the middle. We told family stories and took turns picking one of the silver dollars until all of them were taken. Everybody was happy with the memories.