Flush Investors Take a Shine to Rare Coins

Before you go, we thought you'd like these...
Rare Gold Coin Collection Goes Under The Hammer
Getty Images
By Nia Hamm

Given the record gains Wall Street posted in 2013, you might be tempted to think the financial dog days are behind us, at least for now.

But many wealthy investors continue to pour more of their fortunes into nonfinancial "treasure assets," such as collectible rare coins, in an attempt to diversify their portfolios.

"In the environment that exists right now, where the Dow is very high ... most of the people buying rare coins ... are people who are taking profits as a result of a semibull market ... and want to reinvest some of that money into nondollar-based-type investments," said Terry Hanlon, president of the Professional Numismatists Guild.

While the wealthy have always acquired art, antiques and other such valuables, experts believe that many of today's treasure seekers figure they're not only getting a beautiful object with their purchase but a savvy investment as well.

"We've been seeing many new buyers entering the rare-coin market in recent years," said Greg Rohan, president of Heritage Auctions, which claims to be the world's largest collectibles auctioneer. "Many have collected fine art and invested in precious metals but now also are diversifying their portfolios with rare coins because they can appreciate their beauty and history, while the coins appreciate in value over the long term."

In 2012 the world's millionaires devoted an average of 9.6 percent of their fortunes to nonfinancial assets, such as collectibles, according to a survey by Barclays Wealth and Investment Management and Ledbury Research.

The poll, of 2,000 people with investable assets of $1.5 million or more, also found that the proportion of wealthy individuals who own treasure assets has increased over the past five years. Coin collections, specifically, are up about 2 percent.

Drawing a Pretty Penny

But what really motivates investors to buy collectibles? Is it perceived financial benefits, emotional impulse or, perhaps, both? The answer isn't clear.

%VIRTUAL-pullquote-Markets in fashionable alternatives such as art [and] coins ... are all inherently speculative investments. They produce no income [and] have no future productive capacity.%"All types of financial decisions are inescapably tied to our emotions, and behavioral pitfalls [such as] fear, greed and a host of cognitive biases plague portfolios more than the markets themselves," said certified financial planner Milo Benningfield, founding principal of Benningfield Financial Advisors. "These pitfalls are magnified exponentially when contemplating art, coins and other collectibles."

Emotional investment or not, collectible rare coins are drawing a pretty penny. About a decade ago, a six- or seven-figure price tag was an eyebrow-raiser. Today, not so much.

"The 'Mona Lisas' and Gauguins of numismatics are just exploding in price, as records are being broken virtually every time they come up for sale at auction," said Jeffrey Bernberg, past president of the Professional Numismatists Guild, in a news release.

In fact, rare coins soared 248 percent in value over the past 10 years, according to the Luxury Investments Index, found in the Knight Frank 2013 Wealth Report.


Fear-Driven Diversification

"I think people are starting to decide that they want to start dipping their feet in the water again," said rare-coin dealer Ken Smaltz, who owns K. Smaltz Inc., a company that buys and sells rare coins and precious metals. Smaltz said he's seen an increase in his business within the last several months.

"People are concerned about the economy," he said. "All of these fears cause investors to possibly seek to diversify their investment, and the type of investments they ... look for in this type of environment are usually precious metals and rare coins."

The recent spike in sales of collectibles, such as rare coins, art and antiques, may reflect the increase in liquid assets the wealthy have to spend.

"People [are] taking some of those profits derived from the equities market and the stock market and putting some of that into rare coins," said Hanlon of the Professional Numismatists Guild.

There's no question the rich have gotten richer. The average net worth of the so-called "Forbes 400," Forbes magazine's annual listing of the richest Americans, is now a record $5 billion. That's $800 million more than a year ago.

And a recent study compiled by Wealth-X, a firm that researches ultrahigh-net-worth individuals, found that the wealthiest people in each U.S. state were 19 percent richer last year than they were in 2012.

That gives rich investors more disposable income to spend on luxury items such as collectibles.

Like any investment, rare coins and other collectibles -- considered safer than stocks by some -- carry their own risks. In fact, some financial experts, including Daniel Egan, director of behavioral finance and investments at brokerage services firm Betterment, are reluctant to recommend buying treasure assets to their clients.

"Markets in fashionable alternatives such as art [and] coins ... are all inherently speculative investments," said Egan. "They produce no income [and] have no future productive capacity.

"The entire reason you 'invest' in them is that you may be able to sell them to someone else in the future for a higher price," he added.

Rare coins can be bought or traded through auction houses and dealers or directly from individual owners. But the market is unregulated, making investors frequent targets of fraud.

The office of New York State Attorney General Eric Schneiderman warns investors of this danger.

"There are many steps potential investors can take to minimize this risk, including conducting advance research about the coins and requesting full disclosure from the vendor regarding the value, source and future market value of the coins," said a spokesman for Schneiderman's office.

More from CNBC:

Flush Investors Take a Shine to Rare Coins

Luxist.com takes a peek inside the world of the uncommon and elusive. From wine, coins and jewels to jeans, pets and food -- they reveal the world's rarest items in each of 18 categories.

Click through our gallery to see which prized possessions made the list -- and what makes them so special.


Next: Heard of This Gem?
The world's rarest gem is believed to be painite. The painite is orangish or reddish brown and was first discovered in Burma in the '50s. Within the last couple of years, the source of the two original painite crystals was discovered and now a few hundred faceted stones exist. A more well-known (but still very rare) gem is the red diamond (pic. left).
More Details on Rarest Gems

Next: Rarest Signature
He may have done a lot of writing, but with only 6 of them in existence William Shakespeare's signature is one of the rarest of all and is valued somewhere around $3 million dollars.

See Shakespeare's Signature

Next: Rarest Cats & Dogs
One of the rarest comic books still in existence in near-perfect condition is an issue of "Amazing Spider-Man #1," rare not only because of its singularity but also because of its quality. The comic book sold for only 12 cents per copy when it was published in March 1963, and is now worth over $40K -- not an exceedingly high price for comic books -- but extremely rare in such pristine condition.
More Rarest Comics Details
Next: Rarest Stamp
According to Wikipedia, the most expensive item by weight and volume is the Treskilling Yellow stamp from Sweden. It has a current estimated worth of $2.3 million. Here's what makes it so valuable: In 1858, when the currency was known as the skilling, the 3-skilling stamp ("treskilling") was printed in blue. And an 8-skilling stamp was printed in yellow. But due to a printing error, a few 3-skilling stamps were printed in yellow. More on This Stamp
Next: Rarest Sea Salt
The earliest known sea salt produced by the Japanese may be the rarest of all. Called Amabito No Moshio ("Ancient Sea Salt"), unpolluted sea water is collected from the Seto-uchi inland sea, infused with seaweed to develop the "unami", and then processed by cooking in an iron kettle, put into a centrifuge, and finally, cooked over an open fire while stirring constantly. The salt is worth over $40 per pound.
More on This Type of Salt
Next: Rarest Pair of Jeans
According to the Guinness Book of World Records, the most valuable jeans are an original pair of Levi Strauss & Co 501 jeans aged over 115 years old which were sold to a collector in Japan for $60,000 through eBay in 2005. Quite rare indeed considering a new pair sells for $46.

More on Sought-After Jeans


Next: Rarest Baseball Cards
In February 2007, a "near mint-mint" Honus Wagner sold for $2.3 million, at that point probably the highest sale for a baseball card in history. Then, in September 2007, the same card was reportedly sold again. This time for $2.8 million to a private collector. The card in question, aT206 Honus Wagner, was made by the American Tobacco Company in 1909. It has been called the "Mona Lisa of baseball cards."
More on Why It's So Rare
Next: Rarest Albums

In 1999, Mark David Chapman's copy of John Lennon and Yoko Ono's album Double Fantasy, autographed by Lennon five hours before Chapman fatally shot him, sold. The album had been found in a flower planter outside Lennon's home, at the scene of his murder. The record bears the forensically-certified fingerprints of Chapman, and was even used as evidence in the case against him. Price tag: $460,000. Or was it?
What Record Really Sold For

At the intersection of location, exclusivity and history you find some of the rarest pieces of real estate. With that criteria, Luxist.com blogger's pick for the rarest piece of real estate currently on the market is Bran's castle, the castle in Transylvania that inspired Bram Stoker's Dracula, which is expected to fetch upwards of $135 million.

The Sorraia Horse is said to be the direct descendant of the wild Iberian horse but only 200 currently remain living in South Iberia. The Tiger Horse is a rare breed which is said to have existed in Ancient Spain and the beginning of the New World. Rare in terms of its abilities and characteristics, is the Lipizzaner (pic. left). Bred for its military prowess, one of these animals can sell for up to $100,000.
More on Rare Horse Breeds
Next: Rarest Books
There are countless rare books in the world, but by most experts' standards the rarest of them all is the Gutenberg Bible. It was the first book ever printed back in 1456, and although several hundred copies were originally printed finding a complete first edition would net you $25-$35 million. In today's market single pages alone go for $25K each, and several years ago just 1 volume (it's a 2 volume set) sold for $5.5M.
More Extremely Rare Books
Next: Rarest Necklaces
In the world of rare necklaces, a couple million dollars doesn't get you much. Even ten million dollars is cheap for these babies. The most expensive necklace may likely be one built around the Blue Empress, a rare natural blue diamond. The pear-shaped diamond weighs about 14 carats. It is set in 18k white gold and surrounded with white diamonds. It's estimated to be worth $16 million.
Rare Necklace Runner-Up
Next: Rarest Wine
One of the rarest bottles of wine ever sold was purchased by Christopher Forbes for a mere 105,000 ($160,000). It was an unmarked green glass bottle with the inscription of "1787 Lafitte Th. J." (now known as Lafite and thought to be owned by Thomas Jefferson), found behind a wall in Paris.

Details on More Rare Bottles


In 2006, a 20-inch high blue and white Yuan Dynasty vase fetched over $2 million. That sounds rare but at the end of that year, casino owner Steve Wynn paid even more for a rare vase. The small copper red and white porcelain vase, is a 14th century Ming vase (pic. left) decorated in scrolling flowers. It is from the exceptionally rare Hongwu period and went for around $10.9 million, making it the world's most expensive.
Surprising Place Wynn Put It
Next: Rarest Coins
As a general rule the more rare a coin is the more it's worth, so what's the rarest coin ever? It's a debatable subject as not all experts always agree, but if the Double Eagle isn't at the top of that list it's sure near it. Back in 2002 the only Double Eagle coin left to be in private hands (or so everybody thought) sold for $7.9 million dollars.

More on Other Rare Coins

Next: Rarest Food
Served in China for over 400 years, the primary ingredient in bird's nest soup or "Caviar of the East" is saliva nests built by cave swifts. Among one of the most expensive animal products consumed by humans it is believed to aid digestion, raise libido, and even alleviate asthma as it is dissolved in water to create a gelatinous soup. In Hong Kong, a bowl costs up to $30. Red version can cost $10K per gram.
Is Camel Hump Tasty?
Next: Rarest Travel Trip
What is the rarest trip? There's no real consensus on this, but Luxist.com blogger Deidre Woodward says that the trek to summit Mount Everest still remains among the rarest trips in the world. But even this has become something that is accessible to more people. In two months and for around $60,000 you can join a group and make the attempt of a lifetime.
Rare Trips Money Can Buy
Next: How 2008 Presidential Candidates Live
of
SEE ALL
BACK TO SLIDE
SHOW CAPTION +
HIDE CAPTION


Read Full Story

People are Reading

The Latest from our Partners
1 - 3 of 15