Coin collecting can be an investment option

It may sound odd but it is true. Collecting coins and currency notes can turn out to be a good investment. It may be unusual, as initially, it starts as a hobby but as the interest grows it may tend to become an investment opportunity.

Greater the interest, better and larger would be the collection. The uniqueness of the collection would attract more attention and higher returns. Coins and currency notes are known to have given 20-30% returns on a year-on-year basis.

The value of coins

Coins tell a story which is why there is huge interest among historians and numismatists (persons collecting coins are known by this name). To begin with coins may be bought from dealers who should preferably be licensed. It would ensure that the coin is authentic. The other alternative is to source coins from auctions. In auctions, the price of the coin goes up because of the aggressiveness of the bidders.

Yet another option is the common habit of getting stray coins from friends and relatives. Experts suggest that small amount of Rs 1,000 or so may be set aside every month to start and then build the collection. Once the interest is stable and firm, the collection would start to multiply.

The collection, depending on its uniqueness and rarity, can fetch a good amount if it is traded. The collection then truly becomes an investment. It can be sold to dealers or auctioned. Auctioneers charge a fee of 10% of the sales.

The price of your collection depends on its rarity and condition. The value of a coin is less if its condition is poor but if it is rare then the value would get compensated. There are other factors which determine how much a coin would actually fetch. These are considered to be the metal value, supply and demand of a particular coin and the nature of the coin, whether commemorative or error coin. If the coin happens to be unusually rare then there is scope for the value escalating as the demand would be much more. The returns would be significantly high.

There are many instances of coins fetching substantial amounts to fund specific needs of investors. For example, a collector sold his limited collection for Rs 7 lakh to enable a down payment for purchase of a flat. He could ask for this amount because he knew the value of his coins.   
       
Error coins

How does one determine the value of a coin? It requires a fair amount of study about the type and nature of the coin, its age and its rarity, and of course its condition. Take for example, coins in which minor errors are visible. These errors occur during minting of the coin.

‘Error’ coins are known to command a higher price than prices of similar coins without any error. Then there are ‘proof’ coins which commemorate special occasions and so have greater value than a coin of the same denomination which was minted for regular circulation.

The art of coin collection also has specific terms to describe the degree of rarity of coins and its physical condition. Rarity of a coin is denoted by the abbreviations ‘R7’, ‘R6’, ‘R5’, and so on suggesting ‘one or two specimens existing’, ‘three or four specimens existing’, ‘five to ten specimens existing’, respectively and so on with ‘C’ meaning ‘commonly available’.

Similarly, the condition of a coin is expressed as proof, uncirculated, very fine, fine etc.Let us remember that to make our coin collection special and rewarding we need to do a fair amount of reading in order to know more about each coin. This is possible by reading journals, books and visiting museums as well. There are well-known coin museums in the country which have treasures with them and the ideal place to acquire authentic information. 

We should however remember that investment in coins is not very liquid as finding the right buyer may take time and effort.  Despite this supposedly minor handicap, there are adequate number of options where collections may be bought and sold. There is a fair amount of activity on the Internet where collections may be sourced and traded.

Also, the coin collectors’ club and associations are fairly active in bringing buyers and collectors on the same platform through exhibitions and periodic gatherings. These clubs and associations have their respective newsletters/journals which also provide a window for trading. Coins and currency museum are also known to have bought the collections of many numismatists.

The passion of collecting coins and currency can be rewarding as it is both a learning experience and a serious investment option.

(The writer is a banking consultant)