Wouldn’t it be great to combine a hobby with saving for retirement or investing for the next generation. For coin collectors, it’s something they’ve been doing for centuries and owning a rare penny could be a good way to grow your investment wealth.
Key Takeaways
The Professional Coin Grading Services index has risen 16% in 12 months
Coin collecting may insulate your portfolio from stock market volatility
How rare coins could make you very rich
5 reasons to invest in a rare penny
In ancient times, only the very wealthy could afford to collect coins rather than spend them. But now, like many other alternative investments, coin collecting is becoming increasingly popular amongst ordinary investors. Investing in coins has increased 72% in the last 10 years, according to the 2021 Knight Frank Wealth Report.
1. Combine a hobby with investing
Collecting coins can be a fun and rewarding hobby. Unlike fishing or aerobics classes, it’s a hobby where you could get back or even increase the money you put in.
Coins are fascinating, sometimes beautiful and interesting to research. They’re also easy to store, making them perfect for collectors and they range from ancient Roman and medieval coins to modern rare “mistake” coins.
You may even already own some valuable coins without realising. Modern valuable coins include the following:
‘Mule’ coins with no date: 20p mule coins have recently sold for £70-£80 on eBay.
A 2009 Kew Gardens 50p coin: only 210,000 of these coins have been minted. Experts have valued these coins at £150.89 to £161.50 but are being sold for close to £250 on eBay.
An error 2012 Olympic 50p: ordinary Olympic coins show a swimmer surrounded by waves, but the error coins were produced with waves or lines across the swimmer’s face and are currently valued at £1,500.
2. Own a part of history
Owning a rare penny can be a chance to own a little bit of history. That was a big draw for investors in March 2022, when they flocked to buy a share in a Edward VIII penny, released for sale by the shared ownership website Showpiece. The rare penny was valued at £200,000 and split into 400 pieces worth £50 each.
The coin, worth a staggering 20 million times its original value, is linked to the biggest royal scandal of the twentieth century. Edward gave up the throne on 11 December 1936, abdicating to marry the American socialite and divorcee Wallis Simpson. The coin release was abandoned.
Even if you missed the boat on this investment, there are many opportunities to own a little slice of history through collecting old and rare coins.
3. Potential for increased value
Perhaps the most compelling reason for considering an investment is the potential for increased value. And as more investors look for alternatives from traditional stocks and shares, the value of coins has risen.
A coin index created in 1970 by the Professional Coin Grading Services (PCGS), rose 16% in the year up to 22 January 2022 and an amazing 6315% since it began. That means £10,000 invested in rare coins in 1970 could now be worth an eye watering £641,500.
However, price increases aren’t guaranteed. Like other investments, the price of coins is driven largely by supply and demand so it’s possible that even a rare penny can go down in value if it isn’t in demand or collecting fashions change.
4. Diversify your investments
Owning rare coins can be a good way to diversify your investment stock portfolio. Branching out and investing in other types of assets, like coins, that don’t rise and fall with the stock market can be a good way to insulate your wealth from stock market volatility.
Alternative investments, tend to hold their value during a stock market sell off and often grow gradually in value over time.
5. Pass on your rare penny collection
Like other physical assets, you can pass on rare coins to the next generation. Many wealthy coin collectors have kept coins in their family for many generations. Coins can have sentimental value and make good assets to pass on a little bit of history as well as an asset with some value attached.
Risks involved in coin investing
Owning rare coins can be risky and not all coins are guaranteed to increase in value. Let’s take a look at some of the risks involved:
Storage risks: physical assets are at risk of being lost or stolen.
Difficult to value: you will need to individually value coins as there is no open marketplace for rare coins.
Difficult to sell: like other physical assets, it may take time to find a buyer for a rare penny so they are not suitable if you may need to access your investment quickly.
Not regulated: coin collecting isn’t regulated by the FCA, so you’ll need to watch out for scams, potential frauds and fakes.
Not suitable for short term investment: like many other investments, coins are better suited for long term investment as the value can be volatile in the short term.
What to look for in a rare penny
If you decide to take the plunge and invest in a rare penny then here are some tips:
Stay diversified: most experts recommend not investing too much in treasure assets like rare coins. Instead, it’s a good idea to spread your investments across many asset types like shares, commodities and alternative investments.
Do your research: many coin collectors decide to specialise in a certain period or type of coin. This means you can become an expert and better predict the coins’ value.
Buy certified coins: third-party grading (TGP) means that an expert has graded and authenticated a coin so there’s less risk of buying a fake.
Invest in storage and insurance: if you have a valuable collection then it’s important to invest in suitable safe storage. Also make sure your collection is insured against damage or theft.
Join a collector club: you’ll be able to share tips with others that enjoy the same hobby. You can also learn more about coins and become more knowledgeable about coin collecting.
Conclusion
Given the risks involved, investing in rare coins isn’t suitable for all investors. But if you love history and you want to take up a hobby that’s potentially lucrative, then coin investing could be right for you..
Alice is a Suffolk-based personal finance writer and a qualified Chartered Accountant. She writes on topics including investment, pensions, tax and small businesses. She has previously worked for KPMG London and Tesco Plc.
Alice is a Suffolk-based personal finance writer and a qualified Chartered Accountant. She writes on topics including investment, pensions, tax and small businesses. She has previously worked for KPMG London and Tesco Plc.
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