Numismatics are rare or valuable coins from different periods in history. These fancy old gold coins typically have values that are higher than their real external value mainly because of their rarity and also because of the high demand for them. This means their price is not dependent on the general price of gold on the market or their own face value. This poses a lot of challenges on its own. New investors in the gold coins market are always curious about these coins. Is buying numismatics really a good investment?
While any form of investment is risky, trading numismatics coins is in a class of its own in terms of the associated risk of investing in them. Here are some of the potential risk factors to consider before dabbling into it.
You are likely to overpay
Because numismatic coins are rare, you will have to pay higher premiums for them. But that’s just one part of the problem. The major reason most people end up overpaying is that these coins have subjective value. What this means is that unlike bullion coins that have fixed market price at any given time, numismatics coins vary in value based on the rarity, history, and condition of the coin. These factors tend to mean different things to different people and this means there is really no standard pricing for them.
Unlike bullion coins, collectible cons don’t have spot value. Demand and rarity drive price. If these factors don’t fall into place in your favor you will have to pay more to get the coin. Beware of dealers that try to sell rare coins to you with claims that you stand a chance of earning bigger returns with them. The chances of that are slimmer than with regular coins.
Insufficient knowledge might be your undoing
If you want to succeed as a gold investor, then you really have to get as much knowledge of the market as possible. This becomes even more imperative when you buy numismatics coins. Rare coins hold a certain appeal since you are holding an important piece of history. But just like collecting old comic books or artwork, buying collectible sense would make virtually no sense to a novice. Without sufficient knowledge of the market and how it works, you might end up losing out on your investment.
First-time investors are advised to do as much research as possible on collectible coins before making a purchase. Those who do not have sufficient time to learn or are unwilling to put in the effort are quite vulnerable to losing their investment.
Collectors, not investors drive the market
There are more collectors in the collectible coins industry than investors and this has a major impact on how things work in the market. While this doesn’t mean that there are no investors at all, you need to understand that the major players in the market are people who simply want to add the coin to their collection rather than those that are in it for the profit. While you can still make some profit, the chances of that are less than in the regular market. So if you are in it solely for the profit you will be better off trading bullion coins.
You might have a hard time selling it
Selling a rare coin can be quite tricky. The problem here isn’t a lack of market for it, but how much you would have to sell it. Because you overpaid on the purchase, you might end up getting underpaid when you sell too.
You will need the premium on the coin to appreciate considerably before you can earn sufficient profit on your coin. Since this rarely happens, this means the new collector might not even pay as much as you purchased the coin in the first place.
You can’t also overlook the fact that finding a willing buyer for a rare coin can be difficult. Unlike regular bullion coins with millions of potential customers lining up to buy from you, the rare coin market is only a tiny part of the larger gold market and it is filled with mostly hobbyists and collectors rather than real investors.
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The truth about collecting numismatic coins is that it is more advisable to buy them if you are doing so as a hobby rather than as an investment option. Expert collectors might be able to pull it off and make some profits from trading them, but as a beginner, it is best to stick to regular coins since it offers a bigger market and is a lot easier to understand.