On May 13, 2013 Louis Golino wrote an article for CoinWeek.com entitled “Coins are Not Investments; They are Assets and Collectibles to Be Enjoyed”. In the article he states, “This leads to my personal philosophy of coin collecting, which is “buy only what you really like and that which gives you pleasure to own,” and “periodically sell some of your coins,” or you will be in for a major shock when you do sell.”
I believe his conclusion is not correct about the opportunity for investing in carefully selected numismatic items, in fact for all art and collectibles.
Possibly the most popular investment people make other than a home is the stock market, either through retirement funds or buying equities or funds directly.
A recent study by Blackstar Funds showed the following returns when investing in stocks for the period 1983 to 2007. This data analyzes the Russell 3000 Index which measures the performance of the largest 3000 U.S. companies representing approximately 98% of the investable U.S. equity market.
- 39% of stocks had a negative lifetime total return (2 out of every 5 stocks are a money losing investment)
- 18.5% of stocks lost at least 75% of their value (Nearly 1 out of every 5 stocks is a really bad investment)
- 64% of stocks underperformed the Russell 3000 during their lifetime (Most stocks can’t keep up with a diversified index)
- A small minority of stocks significantly outperformed their peers (1 out of every 5 stocks was a significant winner)
Are the odds better for investing in stocks than for art and collectibles? There are no “sure thing” investments.
I suggest that global demographic changes are making carefully selected art and collectibles attractive investments. Because of demographics, and it is important to think global demographics, more people throughout the world are becoming wealthier and creating disposable income, some of which will go into art and collectibles. This creates growing demand for art and collectibles whose supply is declining. These factors are the game changers for investing in art and collectibles today.
I believe that a passionate and knowledgeable collector working with an honest dealer who is an expert in his field will achieve investment returns exceeding the returns realized by most stock market investors over the long term.
Unfortunately, I believe there are far fewer qualified advisors and dealers in the art and collectibles field than in the securities industry. I believe that the greatest challenge for collectors and investors in the art and collectibles fields is finding honest dealers who are experts who align their goals with those of their clients. These advisors and dealers are the key to successfully building a collection or investment portfolio that has investment potential.
Another challenge for equity investors versus the art and collectibles field is that equity investors typically have different expectations for price performance over both the short and long term than art and collectibles buyers. Equity investors see daily fluctuations in value which for many people distract them from their long term investment goals.