Investment coins include any rare coins, gold coins, sovereigns or bullion (such as Krugerrands), that are incorporated as part of a diverse investment portfolio. They're purchased with the primary objective of making a future ROI, as opposed to coins that are collected purely as a hobby. The quality, scarcity, preservation as well as the intrinsic value of the metal that an investment coin is manufactured from, all need to be carefully considered before it's purchased.
As with any other portfolio asset, it's vital that you know as much as possible about your investment. In this case, if you do not know enough about numismatics to make an informed decision, then it's best to speak to a professional coin dealer who 'll be able to advise you on the best rare coin investment for your requirements and budget. They'll also be in a position to tell you if the rare coins you're interested in are in fact genuine, and they can detect the fine distinctions that separate one grade from another.
When considering your budget, you should aim to buy the best possible coin you can comfortably afford, as it will stand you in good stead in the future. To give you an example, a valuable investment coin with a guaranteed performance over a 10 and 20 year period can be purchased for as little as R5 000, and over 20 years one can expect an annual performance ROI of 18.95%. The bottom line is, when investing in rare coins, quality trumps quantity.
Far from once being the exclusive hobby of royalty and nobility, today rare coin collecting for investment purposes is a realistic option for many people who are looking to make a wise investment. It's been estimated that there are now over 100 million rare coin investors worldwide in today's highly active market. It's interesting to note however that it's only been in the last 50 years or so that rare coins have become a popular way to diversify investment portfolios with tax free assets. That's right, rare coins, for example those from the ZAR series, are not eligible for capital gains tax (CGT) due to the fact that they are officially classified as 'collectables'. It's important to consider that in South Africa, CGT can be as high as 20% and it is imposed on bullion coins such as our own Krugerrands. Tax side, the fact remains that rare investment coins are one of the most portable assets available. They can be transported with little effort, which adds to their high liquidity factor.
If you're thinking about adding investment coins to your portfolio, there are a few things you need to keep in mind.
1) As we mentioned earlier, when it comes to the highest quality and most rare, you should always buy the best possible coin you can comfortably afford. This is because these coins appreciate the most and the fastest.
2) Have a goal to work towards and avoid buying coins in a haphazard manner. Generally, coins are always more valuable if they form part of a set or type, having said that, many sets are difficult or even impossible to complete because the coins are so rare. With this in mind, you need to look at collecting a set or type that is realistically achievable for the time, effort and money you are willing to put into it.
3) Make sure the coins you want to buy are genuine, graded rare coins. Coins that are certified genuine and have been graduated by an independent coin grading company such as the PCGS or NGC is worth much more than a coin that has no grade. In fact, you should be very careful about buying a coin that is not graduated. Quite often, you'll find that a coin comes back with a lower grade than what was promised at the time of purchasing it.
4) Watch out for 'suitcase dealers'. These are individuals who sell coins online and who are only out to make a quick buck. They moonlight as 'professional dealers' but their coins are low value and often ungraded. They're sold for high prices on the promise that they are actually valuable. Unsuspecting buyers find out the true value of the coins when they send them in to be graduated, only to have them come back as 'no grade' coins. If you're serious about investing in coins, then you really do need to make sure you only do business with reputable dealers.
5) Learn as much as you can about rare South African coins. The more you know about the industry and the different coins available, the better you're positioned to make informed decisions. A lot of information can be found online, but do not be shy to speak to coin shop owners, dealers and other collectors, who are in a position to offer invaluable advice.