The Best Way to Diversify Your Investments

Diversify your investments with collectible coins

Earlier this month, a rare Dutch coin sold at auction for $150,000 — the highest sale price ever for a coin from the Netherlands. Minted in 1840, the Netherlands Willem II guilder that sold was one of only two copies in existence.

And just last week at a London auction, an England 1820 (King George III) Gold Pattern Five Pounds sold for £360,000 — against a top estimate of £120,000. It was one of only 25 struck and had previously sold in 1953 for just £360 — compound growth of 11.8% per annum.

With a coin, you can hold a bit of history in your hand and not to mention, something incredibly rare.

But coins aren’t just a key to another time far removed. They are a great asset, offering a way to diversify your investments outside the volatility of the market.

To properly introduce you to the world of investing in rare and ancient coins, I’ve gone in search of an expert.

Geoff Anandappa is an investment portfolio manager for Stanley Gibbons Ltd., the world’s leading brand name in collectibles, based in England but with offices in London, the Channel Islands, Hong Kong and Singapore. The Stanley Gibbons Group includes the world’s oldest rare-stamp merchant (established in 1856) and Philatelist to British Royalty since 1914; and the U.K.’s largest coin dealer, A. H. Baldwin & Sons (established 1872).

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Jocelynn: I think most Americans are aware of the impressive size of the American coin market, particularly with regular stories hitting the newswires about rare Americans coins selling over a million dollars. But are there other markets that investors should be paying attention to because of their growth?

Geoff: Rare and early coins from increasingly prosperous areas around the world are rising in demand from collectors in search of a piece of history. Coins from Eastern Europe, such as Russia, Poland and Hungary, have seen some prices increase tenfold in the past decade. Coins from India and the Middle East, long ignored by Western collectors, are now of intense interest. Even traditional collecting areas — such as Ancient Greek and Roman, as well as Western European and British coins — have increased over fivefold in the past decade.

Jocelynn: Where is this price growth coming from?

Geoff: Some of this demand has been stimulated by the rise in the price of gold and silver — but the bullion value of rare coins is far surpassed by their numismatic value. Far more importantly, collectors have recognized the rarity of coins in exceptional condition, and so the premium for such coins has escalated accordingly.

Jocelynn: If many of these areas are seeing such growth, should investors be worried about these rare coins being overvalued?

Geoff: Despite the strong demand and price rises, these rare world coins are still very much undervalued when compared to their U.S. counterparts. The size and prosperity of the American collector base, coupled with the relatively small number of rare coins, means that U.S. rarities go for 10 or 20 times the price of equivalent coins from England or Ancient Greece and Rome — and perhaps 100 times the price of their Asian or Middle Eastern equivalents.

This discrepancy offers a unique opportunity for U.S. investors to diversify their collection with rare world coins that are seeing substantial and steady growth in value.

Jocelynn: When it comes to American coins, I know that the grade is very important to understanding the quality of the coin, and hence, its value. Does the same grading system apply to significantly older world coins?

Geoff: Most coins sold in North America are graded on a scale from 1 to 70 by independent grading services such as Professional Coin Grading Service (PCGS) or Numismatic Guaranty Corporation (NGC). This may be possible for more modern, mass-produced coins. However, grading is much more difficult and becomes more subjective with older coins — especially hammered coins where the quality of the strike makes each coin unique, even before any wear due to circulation is taken into consideration.

In England and Europe, there are essentially four grades of condition: Fine, Very Fine, Extremely Fine and Uncirculated (“Fleur de Coin” if exceptional). The terms “Good” and “About” can qualify these grades. Thus, Good Very Fine (GVF) is better than Very Fine (VF) which is, in turn, better than About Very Fine (AVF).

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Jocelynn: Do you have any advice for someone who wants to start adding rare world coins to their collection? Where do you begin?

Geoff: Unless you wish to start collecting coins, rather than investing in them, it is not advisable to try to put together “sets.” Often, a set will include less rare coins that are not of investment quality, and therefore less likely to increase in price. Additionally, a set of similar coins will tend to rise (and fall) in value at the same rate. Instead, concentrate on finding rare coins, in the finest condition, from a range of different collecting areas. All of the coins should, in time, show a good return — with a few showing exceptional returns as new areas become more popular.

Wealth Solutions in Uncertain Times

We’ve only just scratched the surface when it comes to using collectibles to increase and diversify your investments. Collectibles, or what we often refer to as “quiet wealth,” is a way of protecting your assets not only from upheaval in the market, but also from the uncertainty we are facing with a government that has accumulated more than $18 trillion in debt and the militarization of our police force. In fact, collectibles are a wealth solution that we explore with members of the Freedom Alliance to add an extra layer of protection in these troubling times.

One great resource is Stanley Gibbons. It can advise the investor on compiling a diversified portfolio of rare coins from England, Europe or the rest of the world. Free storage and insurance are available if required, and annual valuations are provided. There are no management fees or annual charges — and commission is only payable when the coins are eventually sold.

Any rare-coin portfolio from Stanley Gibbons is sold with an investment contract that specifies the terms of the investment and, most importantly, the exit options available to the investor. Collectibles should always be a medium to long-term investment, but the most popular investment contract, The Flexible Trading Portfolio, has no minimum holding period. Investors are free to sell one or more coins at any time, and either take their profits or reinvest in other collectibles.

Geoff is based in London, but you can contact him on his U.S. cell phone at 1-707-466-4999 or by email at ganandappa@stanleygibbons.com.

Proper planning now will not only work to protect your assets as America struggles to find its footing again, but it also help you sleep well at night knowing that you chose to diversify your investments outside the volatility of the market.

Regards,
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Jocelynn Smith
Sr. Managing Editor, Sovereign Investor Daily