Hi, my name is Leonard and I’m a Collector! If you have ever been to my office you have seen some of my collectibles. I collect a lot of things, and I’m proud of my collections. My wife will tell you I go a little overboard, but I don’t listen. In all seriousness, collecting can be both a hobby and an investment.
Today’s topic has to do with collectibles. To be specific, precious metals and coins. I have stayed away from writing on this topic, but lately I have begun to receive inquiries about the subject. Mainly, how and where to buy and later sell? I understand why. It seems all the latenight selling info-commercials and investment gurus are telling you that gold is going to $5,000 an ounce, silver will follow suit, and the inexpensive way to invest in this movement is with coins.
Now, I’m not telling you gold isn’t going to $5,000 an ounce, nor am I predicting it will go to $500 an ounce. If I knew that, I would be writing this newsletter on my private island somewhere. What I will tell you is that these markets are risky and you need to do some homework. Proceed with caution.
All That Glitters Doesn’t Make a Good Investment
Because you buy something made of gold or silver doesn’t mean it’s going to appreciate in value. I have seen and heard of many who have bought the latest gimmick from the Franklin Mint and paid exorbitant prices for the set only to find that when they need to sell it, they are offered less than spot price (market value) of the precious metal. The metals are unquestionably pleasant to the eye. But it’s only worth what someone is willing to pay for it, and that’s usually melt value. Very few items have drawn a premium over the issue price.
Buying items directly (cutting out the middleman) from the source doesn’t necessarily mean it’s going to make a difference. Take the United States Mint for instance. Annual Uncirculated and Proof sets are sold each year from the US Mint, nicely packaged and worthy of displaying, for a price well over the face value of the coins. Today’s coinage has no precious metal. I recently sold sets I bought from the US Mint for well less than the cost of the sets. Most years that happens. Every now and then a set will take off. My suggestion, wait and see. Let someone else pay the issue price. Then swoop in and get a bargain.
Pretty Doesn’t Make a Good Investment Either
Gold, Silver, and Platinum are all pretty metals. I could look at them all day long. Recently, The Shreveport Coin Club held its annual Coin, Stamp and Card Exposition and I enjoyed walking around looking at all the beautifully crafted coins. But is it worth investing in this? I’m a firm believer that a portion of your portfolio needs precious metal as a hedge for inflation. Somewhere between 10 to 20%. I also believe it needs to be managed. When it’s time to sell, do it. No one has ever made a mistake taking a profit.
That said, what do you buy? I believe raw bullion is the best value. If you have to have pretty-Gold, Silver and Platinum American Eagles are a great value. They sell for a few dollars over spot and retain their resell value. Unimpressive bars and rounds may cost closer to spot, and give you the better value for your money. “Raw” means coins or bars minted from the raw materials-unlike proof coins or graded coins, which sell for much more over spot. That premium spent would better serve you in buying additional coins. You will find an easier and quicker selling market in raw coins.
Another nice feature of the American Eagles is “no reporting requirement”. These bullion coins are exempt from reporting to the government on both the buy and sell side, no matter the quantity.
A Local Dealer is a Good Investment
You can just about buy from anywhere today. Internet companies are a dime a dozen. You can even buy on television from QVC or other companies. But dealing with your local coin shop is your best bet. Yes you can buy from a couple of online dealers that are a few cents cheaper than your local dealer, but let’s look at what you get. There are two prices with online dealers. The first price is if you wire your payment or write a check. That will give you about a $1.00 per ounce or so discount. But there is a price to wire your money to them from your bank. There goes your dollar savings. Writing a check means you are going to wait for your delivery. The check has to clear their bank and then it will be mailed to you. Anywhere from 10 days to 2 weeks. At your local dealer, you walk in, make your purchase and walk out with it that day. The other price online is by credit card or PayPal. You pay a $1.00 or so premium for that convenience.
And what about selling your precious metals? Your local dealer makes a market in buying your items also. If you can find an online dealer to purchase your goods, you have the expense of mailing and insuring it to them and waiting for your check to arrive in the mail. Locally, if you need cash today, it’s available by walking in and making your deal. Remember, the local dealers are here and convenient. There is a cost for that. They have rent and electricity to pay and have to put food on the table at their houses.
Building a relationship with the local dealer can profit you also. I have purchased from both of our local coin shops. Both have given me better deals than I expected. I highly recommend you stop by and talk with them. Get to know them. Both are in the Pierremont/Line Ave. corner. American Coins and Collectibles is right next door to Superior Steak House. Its owner is Richie Self. The other is Louisiana Coin Exchange right next to Brookshire’s in Uptown Shopping Center. There you will deal with Nick and Eric Wibben and Scott Bryan.
Again, proceed with caution. I believe silver is a great buy and is a little bit easier on the wallet. Gold as of this writing is around $1,300 an ounce verses silver at around $20.00 an ounce. Percentage-wise, a 10% move in gold brings your investment up to $1,430 where that same 10% move in silver brings it up to $22.00. Of course you can buy much more at $20 than you can at $1300.
If you have any questions, I’ll be glad to sit down with you and discuss the options. Putting away a small percentage of precious metals is a good diversification of your portfolio. Just don’t go overboard.
Diversify your portifolio. A bargin is one thing, but getting ripped off is no fun. Consider all the posibilities. Check the side bar to look for things that you should consider when you are out shopping for your collectibles. This will help you in your thought process. And don’t forget to trust you gut. If an offer sounds to good to be true, it probably is!
And In Closing….
Thank you for the opportunity to serve your financial planning needs. I appreciate your business and look forward to hearing from you soon.