I was recently reading an article on where High Net Worth Individuals put their money, besides stocks. Art, Watches and Wine were the top 3 by dollars invested. By annual returns, classic cars, coins and stamps provided the highest returns. Data was per the Knight Frank Wealth Report 2013.
I decided to dig into the Coins index more thoroughly. It is based on the Stanley Gibbons Rare CoinIndex which is based on British Coins from 150 BC to 1935. Most of the coins are in the £5000 to £30,000 range with some exceptions in the £200,000 range. These coins showed a 10 year return of 248% (or 13.3% annually).
I decided to try the same exercise with a batch of 13 Silver Dollars, I have currently been researching. All of these coins are key or semi-key dates. The 13 coins range in price from $390 (1903-O) to $117,500 (1893-S). I have access to Grey Sheets from 2006 so I decided to calculate 7 year returns. For MS60 coins the returns are 47% (or 6% annually). For XF coins, the returns are -2% (or 0% annually).
These may not all be investment grade coins. Interestingly, the coins that showed the highest returns were in the $750 to $1500 price range. One may therefore have to consider supply and demand. An excellent candidate for this is the 1893-S which has a price range from $2700 in VG condition to $117,500 in MS60 condition. The PCGS population in all grades is 4,849, but the PCGS population in MS60 or higher is only 37. Over a 7 year period, VG and F condition coins are up 15% and 9% respectively. VF, XF and AU coins are down -6%, -6% and -13%. MS60 coins are up 65%.
Similar to the used car market, there is a firm spot from $2000 to $3000 which frequently represents new drivers or low net worth individuals. They just want a car. In the car market, there are also buyers above $20,000 who want to save some money off the showroom floor, but have a near perfect condition car. In the middle, there are fewer buyers.
My conclusion is that coins are not a good investment. The disparity in the Knight Frank Wealth Report (High Net Worth Individuals) and my analysis (US Type Coin Collectors) is most likely based on the pool of buyers. Coin collectors tend to be nationalistic and I would argue that over the last 10 years, Chinese and Indian investment grade coins have probably shown higher returns than US coins over the same time period.