A recent post on a Gold Investment blog has prompted me to reconsider my thoughts on differences between Collectors and Investors. I would like to discuss this within the context of available Gold investments.
This class of persons make purchases which will generate the greatest expected return for their level of risk.
This class makes purchases based on their underlying collecting pattern.
In reality, most collectors are a hybrid of both. That does not apply both ways however. Most investors are not collectors (though perhaps when shareholders place particular sentiment in a company, this could be viewed as collecting?). Hybrid "smart" collectors, rarely make a purchase without thinking about the long run consequences. Most like to think that if they sold their collection in the future, they will make a real (as in not nominal) profit.
Gold and Investing
Many collectors purchase mint gold coins from their country's mints. Personally, I cannpt see why one would spend $5000 on a mint set of gold coins, when one can purchase not one, but several excellent ancient gold coins.
Two caveats when investing in gold coins however:
i. It not a safe investment--at least not as safe as one might think.
ii. Gold coins are low in liquidity compared to other investments available.
Gold is a relatively safe investment, but when purchasing gold coins, one does not investment 100% in gold. Gold coins are sold at a premium to their bullion value. There is thus a 'collecting' or more correctly-- a 'speculative' value attached to the product. This means that the investor of gold coins takes on an additional component of risk, above that of pure gold. Whether that equates to a higher rate of return is to be seen. Indeed, whether the speculative component was valued correctly in the first place by the mint is another question to be asked.
This is by no means to deter a collector from purchasing gold coins, but only to illustrate a point. Indeed, if modern gold coins fit one's collecting pattern, than one should feel free to purchase them.
However, if one would like to invest in gold, it is highly recommended that he see a financial advisor to discuss his options first.
Coin Collecting vs Investing
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12 September 2006
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