History shows that astute investments do net fabulous returns over time. The fact is top quality, rare assets appreciate in value in response to a market demand that exceeds supply. History is littered with examples from rare coins and rare notes, art, to real estate.
Investing should never be confused with trading. They are polar opposites. Astute investors stick to a set of fundamental rules and let time anywhere between two years and ten years, or more, play its part.
Smart investors are known to diversify between different asset classes as a way of spreading risk. Having eggs all in one basket is fraught with danger.
Coinworks managing director Belinda Downie is proactive regarding all issues affecting the numismatics industry. Belinda cares about the state and performance of the numismatics industry beyond operating her own company.
Here, as one part of her company strategy to communicate with existing clients and hopefully new ones, she prescribes a set of investing rules that lengthy industry experience tells her is the most effective way to achieve a successful financial outcome in the rare coin and banknote industry.
INVESTMENT RULE NUMBER 1 – BROAD STRATEGY
Investing in rare coins and banknotes should be part of an overall investment strategy. Most Coinworks clients view the numismatics market as a means of preserving capital with the potential for mid-to-long term growth. The recommended minimum investment time frame is five years.
Like any asset class, the more homework you do increases the prospects of a better investment. A buy strategy is essential to sealing the best deal. And have a sell plan in place. No one goes broke from realising a profit. Stick to your objectives.
Sometimes, it’s easy to become emotionally attached to an investment, particularly when it involves the beauty associated with rare historical coins, increasingly referred to as heirloom pieces. Again, question your buying objectives. Did you buy a precious rare coin to pass on to your grandchildren? If so, an emotional attachment doesn’t matter.
However, if you invested in a rare coin to make money, then resist emotional temptations. Emotions cloud your judgement. After all, you’re investing to make money.
RULE NUMBER 2 – SELECTIVE BUYING
Market values of rare coins and banknotes are driven by supply and demand. Fashions and trends come and go, so Belinda advises clients to stick to mainstream product, which, as a general rule, generates demand by appealing to a broader buying base.
“What better example than the 1813 Holey Dollar,” Belinda says. “It’s standing as Australia’s first silver coin ensures that it will never be forgotten and, as time passes, its historical value only increases.”
RULE NUMBER 3 – STAND-OUT CHARACTERISTICS
Quality, rarity and provenance can’t be over-emphasised when investing in rare coins and banknotes. All three combined drive up values over time and ensure a piece stands out from the rest.
Investors who buy product with these three stand-out characteristics will certainly appreciate their decision when it comes time to sell. The best on offer are somewhat cushioned from economic and market performance in Australia and abroad. Buyers will circle top quality pieces and pay a fair market price.
As Belinda says: “If the market happens to be a little subdued when the time comes to sell, it’s important to be able differentiate your product from the rest.”
RULE NUMBER 4 – EXAMINE MARKET COMPETITION
Belinda suggests buying products in a sector of the market where there’s minimal competition to challenge the price structure of your coin.
Importantly, Belinda advises: “We’re not only examining the inherent traits of a product under consideration, we’re also running the ruler over the product’s market.
“One sector of the market that demonstrates this rule involves Perth Mint Gold Proof Sovereigns. All gold proof sovereigns are rare and excellent pieces to own. But those of the Perth Mint are exceptionally scarce as they were struck in three separate years – 1899, 1901 and 1931. Conversely, Sydney Mint gold proofs were struck in 22 years, and those of the Melbourne Mint 33.”
RULE NUMBER 5 – MATCH PRODUCT WITH FAIR MARKET PRICE
There’s simply no substitute for knowledge and experience. Coinworks wants its clients to enjoy the products they buy and to experience increasing values over time. Also, Coinworks wants clients to be totally satisfied with the decisions they make. As opposed to hesitant clients regretting their decisions after the event.
The company thrives on satisfied clients.
Knowledge of products and markets is embedded in the Coinworks doctrine. It matches quality products with fair prices, building in room for capital gains over time.
Avoid paying way too much for a piece because it will take longer to build gains. Buying a coin or banknote because it’s cheap doesn’t sit with Coinworks objectives. “If a coin or banknote is cheap, but goes nowhere, then the investment has been a poor one,” Belinda says.
The very nature of the numismatics industry means some extremely rare top quality pieces simply aren’t available for sale at any one point in time. Offering the rarest of the rare for sale can sometimes be a once in a decade opportunity, or perhaps longer.
Contemplating the vagaries of any asset class presents challenges. Highly regarded specialists in any asset class constantly examine products and market directions to consistently extract the best outcomes. That leaves trust and confidence in the eyes of the client.
In offering knowledge, experience and professional service, Coinworks is a committed communicator. Coinworks is constantly communicating with clients and a broader audience, either by appointment, on the phone, in print (catalogues), online or in the media, as part of a broader strategy to inform, educate and entertain anyone with an interest in the rare coin and banknote industry.
This set of Coinworks investment rules is worth noting and revisiting in an industry laced with history, mixed with quality and rarity and driven by collectors and investors on a global scale.
In a new article soon, Coinworks will show how it applies its investment rules in examining the world famous Madrid Holey Dollar.