People collect things for all manner of reasons; there is no explaining why people collect any particular item. With coins (or watches, for that matter) people choose to collect them because they find them interesting, but no two collectors may agree on exactly what interests them.
The scarcity? The beauty of the piece itself? The investment potential?
Most collectors probably don’t collect for investment reasons, but the markets for any collectible will have investors in them. That’s just the nature of anything valuable – art, automobiles, wine, watches, coins, stamps – you name it. Over time, rarities in all of these fields have gone up in value, and when this happens, people notice.
When people notice, investors get involved. Collectors tend not to like that, as the presence of investors in any hobby will necessarily drive the prices up.
One may expect that to get even worse in the coin field, as the Economist recently published an article pointing out that over the past en years, investments in coins were up nearly 200% (195%, to be exact.) This compares to smaller, but still substantial, returns for art (139%,) stamps (133%,) and the S&P 500 stock market (a mere 58%.)
If you’ve invested in furniture, you likely lost money, as furniture was down 31% during the past decade.
The problem with investing in collectible items is that they’re not entirely liquid. Bulk gold or silver coins, purchased for their bullion value, rather than their date, condition, or mint mark, may be relatively liquid, but rare coins purchased for date, mint or condition are not overly easy to part with in a pinch.
You’ll have to sell them to a dealer at a discount, sell them on sites such as eBay (and give them 10%), or sell them at auction. There, the buyer will pay the premium, but these things all take time, making even coins, which represent actual money, surprisingly illiquid.
They’re more liquid than paintings or furniture, to be sure, but getting rid of a collection of rare coins is going to be more time consuming and more costly than selling stocks, even if you did make more than three times as much money on them.
What collectors don’t like about investors in their hobby is that the investors don’t particularly have any interest in what they’re buying. They’re buying a widget, and they expect that widget to become more valuable with time. They don’t care what the widget happens to be, where it came from, what it looks like or what kind of condition it may be in. All they want is to be able to sell it for more money tomorrow than they paid for it today.
Collectors, on the other hand, tend to cherish the items in their collection. They know the difference between one item and the next and they know why their different and why Item A might be more desirable than Item B.
They also know that Item A will likely cost them more to acquire now that investors are buying in.
This has been an issue for a long time, but if coins are returning a lot more money over time than other investments, you can rest assured that more people will be buying into rare coins in the future.
This trend isn’t entirely new, however, as this video from three years ago indicates: