Between the Issues
Rare Coins: A Distinct and Attractive Asset Class
by Robert A. Brown, Ph.D., CFA
Robert A. Brown, Ph.D., CFA serves as Chairman-Investment Management Executive Committee
and Chief Investment Officer for GE Private Asset Management, Inc., located in Encino,
California.
Abstract
It has been suggested that the decade ahead may offer relatively unattractive asset class returns
for the most traditional investment categories such as large-cap domestic equities. The resulting
debate has promoted interest in such less traditional asset categories as venture capital, hedge
funds, commodities, timber, real estate, energy, works of art, and collectibles on the part of both
institutional and individual investors. It is this last category of rare collectibles, specifically coins,
which I examine within this paper.
According to the Financial Times, over the past 50 years art as an investment has shown returns
in line with the S&P 500 Index, according to the Mei/Moses Fine Art Index, which tracks 6,300
works sold at auction in New York. From 1954 to the end of 2003, art returned +12.6 percent,
according to Mei/Moses (versus +11.7 percent for the S&P 500).
Under this broader rare art and collectibles universe, similarly attractive performance can be
found in the rare-coin market, which, excluding silver coins and bullion-based gold, exceeds $40
billion. This paper offers an unbiased assessment of the inherent, fundamental, and relatively
permanent risk, return, and diversification properties of the robust collectables sub-segment
called numismatics and is based on rare-coin pricing data spanning a 62-year period.
The data accumulated, analyzed, and presented here suggests a highly attractive complementary
asset category that even with a small allocation provides good diversification for a well-diversified
portfolio, and whose returns look impressive when compared against the fixed-income category
and as an inflation hedge. In addition, capital and economic market conditions suggest that rare
coins could exhibit above-normal returns compared with underperforming recent years.
Allocation of a portion of an individual’s portfolio to rare coins must be pursued with full
appreciation for the non-income generating nature of this asset category and recognition that no
profit-generating corporate entity stands behind it. Moreover, rare coins exhibit a relative lack of
liquidity and potentially high transaction costs.
With the failure of the S&P 500 to reach lows that would have brought the majority of fundamental
valuation measures back to their historic norms, many of our industry’s more serious thinkers,
those with real gravitas, have suggested that we’ll experience long-term investment challenges
ahead. Investment luminaries such as Robert Arnott (editor, Financial Analysts Journal), Peter
Bernstein (consulting editor, Journal of Portfolio Management), Bill Gross (PIMCO), John
Templeton (Franklin/Templeton), Bill Bonner (The Daily Reckoning), Jim Grant (Grant’s Interest
Rate Observer), Jeremy Grantham (GMO), and Stephen Roach (Morgan Stanley) have
suggested over the last two years that the decade ahead may offer relatively unattractive, if not
painful, asset class returns for the most traditional and vanilla investment categories such as
large-cap domestic equities. The resulting industry-wide debate has prompted a serious
reexamination of less traditional asset categories such as venture capital (and its associated
neighbors and offspring within the private investment arena), hedge funds, commodities, timber,
real estate, energy, and rare art or collectables. It is this last category of rare collectibles that I
examine within this paper—focusing specifically on the subcategory of rare coins or numismatics.
Stephen Roach, among others, believes that domestic stocks, bonds, and residential real estate
are simultaneously and significantly over-valued as a result of excess liquidity having been
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Rare Coins: A Distinct and Attractive Asset Class - Continued
pumped into our economy through actions by the U.S. Federal Reserve and by the monetary,
savings, and investment behaviors of foreign nations. If true, as financial planners we have the
responsibility to seek less traditional asset categories that remain predominantly unaffected by
today’s extreme overabundance of liquidity.
Rare coins is one such nontraditional asset category. But why consider rare coins as a viable
component of your client’s total wealth management solution? As will be demonstrated below,
rare coins have historically offered fairly consistent and attractive levels of return, risk, and
diversification. Over the last 62 years, this asset category has delivered an arithmetic mean
annual return (before inflation) of 10.5 percent with a relatively low standard deviation of 12.3
percent. But the real benefit derived from this asset category lies in its diversification power.
Some of its best relative performance is delivered during those periods when long-term bonds
perform particularly poorly.
Moreover, it is not uncommon for high net worth clients to already be comfortable with and have
significant holdings in the rare art or rare coin markets. Nevertheless, investment in the asset
category of rare coins entails a series of distinct challenges. These potential impediments include
transaction costs (bid/ask spread), transaction time, specialized knowledge, proven investment
properties, market depth, lack of dividend or interest income, and recognition that no profitgenerating corporate entity underlies the asset category.
Clearly, rare coins are a highly distinct asset category, offering a remarkably different set of
investment characteristics and properties. But the impediments recognized in the preceding
paragraph must be overcome. Much as with physical real estate (so-called “bricks and mortar”),
the sale and purchase of rare coins entails incurring a measurable bid/ask spread. This obstacle
is significant, but with reduced trading, investors can satisfactorily overcome turnover through the
attractive long-term fundamental returns accruing to this asset category. Once again, just like
physical real estate, participants in the rare coin market should allow significant time to complete
acquisitions or sales. Nevertheless, the speed with which coin prices evolve is sufficiently slow
and gradual to accommodate the more extended time required for transactions.
Finally, just as with physical real estate, specialized knowledge is well developed and readily
available at a reasonable cost and is delivered by a wide range of professional dealers in the
marketplace. The challenge of verification is no longer an issue, as all investment quality coins
are authenticated and encapsulated by two primary service bureaus: Professional Coin Grading
Service and Numismatic Guaranty Corporation of America. Valuation is well handled by the ready
availability of recent transaction prices (providing investors with accurate bid/ask spreads) and
through the advice of professional dealers—much as is the case with the private real estate
market. Safekeeping (storage and insurance), however, remains an ongoing expense—once
again, not dissimilar from bricks-and-mortar real estate.
The last two potential impediments—proven investment properties and market depth, are the
primary subjects of this article. As described below, returns in both an absolute standalone basis
and, more importantly, in a well-diversified portfolio context, have been highly attractive over the
last 62 years. Similarly, the market for rare coins is deep, well developed, and improving.
Art and Collectibles Universe
I begin my examination of rare coins with a quick high-level review of the far broader rare art and
collectibles universe. If the investment merits of rare coins are real and substantive, then we
would expect to find equally attractive performance within the more broadly defined arena of art
and collectibles.
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As reported in the January 27, 2004, London Financial Times, the Artprice Global Index rose 1.5
percent in 2003. This index includes the prices of 30,000 works of art sold at 2,900 auction
houses around the world in 2003 and is considered to be a reasonable measure of the state of
the aggregate global high-end collectables marketplace. In 2004, the Artprice Global Index rose
24.4 percent. Another index, the Mei/Moses Fine Art Index—All Art, showed gains of 21.7 percent
and 13 percent in 2003 and 2004, respectively. Over the last 50 years (1955–2004, inclusive) this
index appreciated 10.5 percent annually versus 10.9 percent for the S&P 500, 6.6 percent for 10year U.S. Treasury bonds, and 5.4 percent for short-term U.S. Treasury bills. This index is
noteworthy because it tracks over 8,000 works sold at auction and is therefore based on real-time
investor-realized pricing. Fernwood Art Investments LLC, a New York-based company, founded
recently by former Merrill Lynch & Co. Inc. veteran Bruce Taub, began offering art-based funds in
early 2005 as an alternative asset class. Funds and investment partnerships are being formed to
offer shared interests in portfolios of paintings by old masters, impressionists, and others.
Fernwood states “Art is like what real estate was 30 years ago, it’s ripe for investment.”
Rare collectibles as an investment and as a personal pursuit have been with us for centuries. But
one of the oldest and most well-developed segments of the collectables asset category is that of
numismatics or rare coins. In 1912, the U.S. Congress created the American Numismatic
Association (ANA) to promote popular interest in the study of numismatics.1 Barry S. Stuppler, a
member of the ANA’s nine-person board of governors, estimates that the total rare coin market
experienced domestic sales approximating $2 billion in 2003. Moreover, he estimates that the
total supply (market value) of domestic rare coins is in the neighborhood of $40 billion (and this
figure does not include bullion-based gold and silver coins that would bring the total market value
up considerably).
The depth, vitality, and consistency of the numismatic marketplace are exemplified by numerous
anecdotes.
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In February 1989, Kidder Peabody launched a $40 million rare coin investment fund, later
increased to $110 million, named the American Rare Coin Fund.
A year later, in February 1990, Merrill Lynch underwrote a $50 million fund called the
NFA World Coin Fund Limited Partnership. United Bank of Switzerland (UBS) maintains
a separate and independent division, UBS Gold & Numismatics, designed to provide an
ultra high level of professional advice by experienced experts in the field of numismatics
to its private client base.
In a July 2002 Sothebys/Stack’s auction a 1933 $20 double-eagle gold piece sold for
$7,590,020. In 1960, this same piece traded for $25,000—a 14.6 percent annual rate of
return over 42 years.
In an August 1999 Bowers & Merena auction, an 1804 proof silver dollar sold for
$4,140,000. In 1960, this same piece traded for $30,000—representing a 13.5 percent
annual rate of return over 39 years.
In an early 2004 Blanchard and Company auction, a 1913 Liberty nickel sold for $3
million. In 1960, this same piece traded for $50,000—a 9.8 percent annual rate of return
over 44 years.
Finally, in a May 1999 Goldberg Coins auction, a 1907 ultra high-relief $20 double-eagle
gold piece sold for $1,210,000. In 1960, this same piece traded for $20,000—an 11.1
percent annual rate of return over 39 years.
It should be emphasized that the returns stated above are gross of appraisal, insurance, storage,
and other transactions costs (similar to but higher than what one would experience in the private
real estate industry).
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In the context of these examples and data, this paper’s objective is to offer an unbiased
assessment of the inherent, fundamental, and relatively permanent risk, return, and diversification
properties of the robust collectables sub-segment called numismatics.
Methodology
Rare coins may be stratified along numerous dimensions; however, one convenient classification
divides the universe by metal type: copper, silver, gold, and other precious metals. The behavior
of the precious metals (gold, platinum, and palladium) spot and futures markets has significantly
affected the return behavior of rare gold coins during periods of extreme precious metals price
volatility. So as not to confuse and otherwise intermix the behavior of precious metals and
numismatics, I have excluded gold and other precious metals (platinum and palladium) coins from
this paper’s analysis. Moreover, for consistency and reliability I have restricted the analysis to
U.S. coins and pricing data has been drawn exclusively from domestic sources.
All rare coin pricing data was provided by the following two sources: Handbook of United States
Coins with Premium List (the Blue Book) for the annual copyrights 1942 through 1951, and A
Guide Book Of United States Coins (Red Book) for 1950 through 2004.2
Coin-price data provided from these publications was used to build unique equal-weighted (by
dollar value invested) portfolios of coins for each individual year. These portfolios were then
tracked to the subsequent year and an annual return was calculated. The composition of each
year’s portfolio was uniquely tailored in order to most evenly distribute holdings across the entire
available domestic universe at that time. Selections were evenly spread across all copper-based
and silver-based U.S. coins. For publication copyrights 1942–1960, portfolios consisted of 600
individual coins. For copyrights 1960–present, portfolios consisted of 650 unique rare coins. The
higher 650-coin count was used during the later years with the objective of better representing the
breadth and depth of the more modern rare coin market relative to the somewhat narrower pre1960 marketplace.
Minimum coin condition was generally held to the highest available as reported in the thencurrent Whitman publications. In the initial years, such as 1942, “fine” was the minimum condition
included within the 600-coin portfolios. The maximum condition (MS-65) appearing across all
portfolios was similarly defined by the reporting limits of the Whitman publications.
As an example, a portfolio of 650 copper and silver coins was created and based on the pricing
appearing in the 2004 edition of A Guide Book of United States Coins. Coins were selected with
the objective of evenly dispersing the holdings across the entire available universe as reported in
the 2004 Red Book. Portfolio holdings were equally weighted (by dollar amount invested in each
coin). The 2005 edition was used to reprice the original portfolio and determine an annual rate of
return, (+16.39 percent in this instance.)
A Critical Question
A critical question concerns the exact start and end dates for the annual 12-month investment
windows. For example, the 2004 edition has a 2003 copyright and was first released to the public
in late July 2003. The start date for the subsequent 12-month investment window depends on
when the coin price data was collected for this publication. This paper’s analysis is based on a
specific estimate for each annual return’s inception date. The following methodology was
employed to make this estimate.
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A series of 62 annual returns were calculated based on the Blue Books and Red Books spanning
1942 through 2004. This series was compared against annual returns for 13 other unique and
fully differentiated asset classes (spanning both fixed-income and equities). The annual rare coin
return series was next shifted one month at a time, both forward and backward. This generated a
series of 31 alternate comparisons (that is, no time shift, 1-month through 15 months shifted
backward, and 1-month through 15-months shifted forward). An evaluation was completed for
each of these 31 return series. Specifically, I calculated the correlation coefficients between the
rare coin series and each of the 13 other asset categories. A median correlation (across the 13
alternate asset categories) was identified for each of these comparisons. I then identified the
single rare coin time series (from among the 31 alternate shifted series) that delivered the highest
median correlation coefficient. The answer turned out to be the rare coin series that had its series
shifted backward in time by one month. In other words, I found that by assuming that pricing data
taken from the 2004 edition of the Red Book with copyright 2003 was actually obtained from the
marketplace on November 30, 2002, then the correlation coefficients with 13 other common asset
categories were maximized. This result, in effect, amounts to a shift backward in time by one
month (that is, from December 31, 2002 back to November 30, 2002).
Underlying this methodology are the following premises. First, coin prices appearing in a 1990
edition with copyright dated 1989 will have been collected either very early in 1989 or sometime
in late 1988. Second, asset classes have a strong and fundamental tendency to move in tandem
with the passage of significant time. Thus, they generate positive correlation coefficients. Third,
the most realistic assessment as to the time positioning of the annual rare coin series can be
determined by positioning the annual window so as to achieve a maximum median correlation
coefficient. The statistical result identifying an initial start date of November 30th of the year
preceding the annual copyright date is intuitively appealing. It suggests that the data reflected in
the 1990 edition with copyright 1989 was current and immediate in the rare coin marketplace as
of November 30, 1988. The November 30, 1988, date is also logically consistent with the public
availability of the final publication—that is, on or about July 31, 1989. This would allow
approximately eight months to collect the rare coin data, interpret it, update the guidebooks, send
them for printing, and distribute them to retailers for public sale.
Results
Table 1 provides this paper’s estimates for rare coins’ annual returns spanning the period
November 30, 1941, through November 30, 2003. Returns ranged from a low of –7.46 percent
(1981/1982) to a high of +48.08 percent (1971/1972), with a median annual return equal to +6.26
percent. During the last 62 years, rare coins delivered a positive return 84 percent of the time (52
of 62 years as based on annual returns) and an annual return greater than 10 percent 40 percent
of the time (25 of the years from 1941 through 2003, inclusive).
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Table 2 provides the nominal (not inflation-adjusted) summary statistics for this series. Relative to
13 other popular asset categories, rare coins appear to offer relatively higher average annual
returns with commensurate to moderate levels of return volatility. Over the last 62 years, rare
coins offered an average annual arithmetic mean return of 10.46 percent and an average annual
geometric mean return of 9.83 percent, with a standard deviation of 12.3 percent. This compares
quite favorably against growth stocks over this same 62-year period, which delivered average
annual arithmetic and geometric returns of 12.35 percent and 11.02 percent, but with a
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significantly higher standard deviation of 17.1 percent.
It should be noted that Table 2 reports on all total return series for which monthly return data is
available spanning the entire time period indicated (November 30, 1941, through November 30,
2003). Data for asset classes other than rare coins were taken from the Ibbotson Associates
databases. Standard deviations were calculated on annual returns with years starting and ending
on November 30 as described in the data methodology in preceding sections of this article. It is
believed that the standard deviations are directly comparable across all of the asset classes
appearing in Table 2, including rare coins, because each return series is based on actual
transaction data as opposed to valuation estimates (as frequently occurs with private real estate).
Table 3 provides the same statistics but in real (fully inflation-adjusted) terms. A relevant
observation for rare coins is highlighted through a comparison of Tables 2 and 3. Observe how,
after adjustment for inflation, rare coins’ return-per-unit-of-risk declines from 0.80x to 0.46x. Yet,
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intermediate U.S. Treasury bond’s return-per-unit-of-risk declines by a far greater amount, falling
from 0.99x to 0.24x. This difference is a result of rare coins’ propensity to deliver a degree of
protection during inflationary environments. This observation is supported by the clearly superior
correlation coefficient between coins and inflation (0.12) relative to the correlation coefficient
between the S&P 500 and inflation (–0.31).
Table 4 reports the correlation coefficients between rare coins and each of the 13 primary asset
categories (plus CPI inflation) based on nominal returns (non-inflation adjusted). Rare-coin
correlations with equities tend to be higher than with fixed income due to fixed income’s poor
performance during periods of rising inflationary expectations. Note rare coin’s correlations of
0.12 and –0.36 with the S&P 500 Index and intermediate U.S. Treasury bonds, respectively,
offering powerful diversification potentials.
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More Powerful Diversification Role
Using real returns (after adjustment for consumer price inflation), we obtain the correlation
coefficients appearing in Table 5. Comparing data appearing in Tables 4 and 5, we note that
correlations increase significantly across all asset categories moving from Table 4 to Table 5. But
the correlations for rare coins increase less than any of the other asset categories (that is, rare
coins’ average increase amounts to a lesser +0.112 versus the other 13 asset categories average
+0.153 increase). This smaller change results from coins' superior behavior during inflationary
environments and allows numismatic investments to potentially play a more powerful
diversification role within a portfolio.
The practical benefits or attraction of rare coins as an asset category are best demonstrated by
examining the cross-time performance characteristics of portfolios with and without their
inclusion. The bid/ask spread associated with buying and/or selling numismatic coins tends to be
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quite high. In a cross-time portfolio context, this has an important practical implication;
specifically, regular periodic rebalancing of one’s allocations to coins in a portfolio is impractical.
Table 6 provides a historical view of portfolio performance with and without the inclusion of rare
coins. But this data assumes an initial allocation to coins of 0 percent, 5 percent, 10 percent, 15
percent, and 20 percent, with no rebalancing during the 62 years covered by the analysis. By
avoiding periodic rebalancing, this paper delivers a more realistic view of how investors actually
construct and maintain exposure to this attractive asset category.
Notice how a portfolio with an initial 15 percent allocation to rare coins delivers a geometric mean
return 1 basis point lower than that same portfolio with a 0 percent allocation to coins. But the
standard deviation falls from 10.7 percent to 8.7 percent after the inclusion of rare coins, and the
worst single annual return improves from –20.3 percent (without rare coins) to –16.6 percent
(after inclusion of rare coins).
But no asset category should be evaluated solely on the basis of simple summary statistics
spanning some long-term time period. Asset categories have a propensity to deliver performance
attuned to the current-period capital market and economic environments in which they operate.
During the 18-year period ending November 30, 1999, for example, rare coins returned an
unattractive 0.0 percent a year.
The causality underlying this painful time period is not difficult to identify. First, during the prior 18year time period (1963–1981) coins returned +14.2 percent annually, generating a level of overexcitement that probably drove rare coin prices to a transitory level from which prices needed to
fall back. Second, during the nine years ending November 30, 1999, the S&P 500 returned
+21.01 percent a year. This abnormally high stock market return spanning an unusually long time
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period had the effect of pulling assets either out of or away from investment in numismatic coins.
Third, inflation (as measured by the CPI) was running at a rate of +12.74 percent for the year
ending November 1979. Just seven years later, this same inflation rate had fallen to +1.29
percent (year ending November 1986). This remarkable fall in the rate of inflation removed a key
motivational factor that had previously been driving coin prices during the 18-year period ending
November 30, 1999.
Improving Coin Environment
Today it would appear that the environment is changing. Capital market and economic dynamics
are potentially evolving in directions that will result in below-average stock market returns while at
the same time delivering a period of rising inflation. If we experience such a capital market
environment, rare coin investments may deliver above-average returns.
Graph 1 provides a historical cross-time view of the path followed by inflation-adjusted rare coin
prices since 1941 plotted on exponential scale (natural log scale). By using an exponential scale,
equal vertical distances correspond to identical percentage rates of return independent of the
current absolute level of coin prices. The solid line identifies the growth of one dollar invested in
numismatic coins over the 62-year time period. This line shows an average annual inflationadjusted geometric mean return of 5.5 percent. The dashed line shows the constant rate of return
path determined by applying a best-fit analysis. This second, perhaps more realistic,
characterization of history shows an average annual geometric inflation-adjusted return of 5.6
percent for numismatic investments.
Since 1941, rare coin returns have followed a reasonably constant return path—exhibiting
occasional periods of out- and under-performance. But as of November 30, 2003, rare coin prices
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stood 131 percent below their trend line path. This level of below-path pricing is most likely a
function of the recent below-normal return experience being driven by low inflation in combination
with considerably above-normal stock market returns. Of special note, coin returns began a
marked turnaround starting November 30 2001 having risen a total of +25.2 percent
(unannualized) since that date.
A different method for exploring the environment-dependent nature of rare coin returns is
demonstrated by comparing fixed-income portfolios constructed with and without numismatic
investments. Table 7 shows the 62-year summary statistics for these alternate fixed-income
portfolios in real terms (that is, after adjustment for CPI inflation.) By making these comparisons
after inflation adjustment, we are able to emphasize how relatively small allocations to rare coins
can deliver radical improvements to a fixed-income portfolio’s inflation-fighting performance.
Table 7 presents a series of six portfolios with initial allocations to numismatic investments of 0
percent, 5 percent, 10 percent, 15 percent, 20 percent, and 25 percent. As before, the allocations
between rare coins and the other asset categories are not rebalanced with the passage of time.
The fixed-income portion of these six portfolios consists of a mixture of long- and intermediateterm U.S. Treasury bonds which are rebalanced once each year to maintain a constantpercentage allocation.
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The fixed-income portfolio without numismatic investments experiences a standard deviation of
7.3 percent. The same portfolio with an initial 10 percent allocation to rare coins delivers a lower
standard deviation of 7.2 percent and a higher geometric mean return of 2.67 percent (versus
1.54 percent without coins). Similarly, note how the bond portfolio without rare coins suffers a
worst single year of –14.4 percent. In contrast, the bond portfolio with an initial 25 percent
allocation to numismatics experiences a far less severe worst single year performance of –10.2
percent. These data suggest that investors seeking the most conservative portfolios (that is, bond
portfolios) may be better served by incorporating small allocations to numismatic investments as
a method to significantly enhance the inflation-protection characteristics of their otherwise
attractive fixed-income securities.
Investability
Three issues generally define the question of just how viable rare coins or numismatics are as an
investable asset category for small portfolio allocations. These three factors are the bid/ask
spread, liquidity, and asset class-specific expertise. Bid/ask spreads in the rare coin arena are
consistent with those found in other sub-segments of the rare art/collectables marketplace. At the
high end, bid/ask spreads can approach 40 percent. But the rapid growth of both the electronic
and physical auction market and the robust development of authentication and grading of rare
coins are serving to reduce these spreads across the numismatic spectrum. The best-developed,
commonly traded, and standardized (through third-party authentication) coins may trade at
bid/ask spreads approaching 10 percent.
Liquidity concerns the time it takes to execute a transaction, whether a buy or a sell. It also
affects the size of the transaction and indirectly the bid/ask spread that is paid. In the field of
numismatics, the transaction time period is properly measured in months as opposed to minutes
or hours, such as one would find in trading large-capitalization shares on the New York Stock
Exchange.
In general, the rare-art marketplace requires significant knowledge, experience, current
information, and close contacts with key participants to be fruitfully exploited from an investment
standpoint. The field of numismatics is no different. But one of the reasons that a bid/ask spread
exists is to compensate the rare-coin dealer for the advice and consultation he or she provides.
Yes, part of the bid/ask spread is compensation for performing the function of, in effect,
marketmaker. But in today’s numismatic market, there exists a wide cross section of highly
professional coin dealers who view their buyers as long-lived, permanent clients for whom they
deliver expert advice and consultation on how best to assemble a portfolio of numismatic items
designed to achieve a long-range objective. Such dealers have intimate knowledge of markets
and the longevity of participation to properly assess the current environment. So as with many
other investment asset categories such as venture capital, buyout, hedge funds, and real estate,
one pays for the required (and desired) expertise via the direct or indirect bid/ask spreads
reflected in the investment vehicle. Rare coins are no different.
Conclusions
As ANA’s governor Barry S. Stuppler has suggested, the marketplace for numismatics is both
broad and deep, having now reached an aggregate market value in the vicinity of $40 billion (and
this figure does not include bullion-based gold and silver coins that would bring the total market
value up considerably). It is an active market where single isolated auctions can experience
transaction volume over $30 million. Professionalism and initial efforts towards institutionalization
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have been demonstrated by numismatic investment funds launched by Kidder Peabody and
Merrill Lynch and by United Bank of Switzerland’s UBS Gold & Numismatics professional
consulting division.
Pricing data drawn from the last 62 years of history (1941–2003) suggest an attractive and
potentially highly complementary asset category—particularly relative to fixed-income securities
and as an offset to inflation. Over this period, rare coins, the S&P 500, and long-term U.S.
Treasury bonds have delivered geometric mean returns of 5.52 percent, 7.86 percent, and 1.38
percent, respectively, after adjustment for inflation. But after reflecting their differential standard
deviations, we find that rare coins, the S&P 500, and long-term U.S. Treasury bonds have
delivered return-per-unit-of-risk of 0.46x, 0.46x, and 0.18x, respectively after inflation adjustment.
Rare coins’ greatest benefit may be one of diversification. The S&P 500 typically correlates with
other common asset categories at a level of between 0.28 and 0.97 (inflation adjusted). In
contrast, numismatic investments have delivered correlations across similar asset categories
ranging from a far lower –0.21 to 0.29.
Web Sites Readers Might Find Helpful
American Numismatic Association www.money.org
United States Mint www.usmint.gov
Professional Coin Grading Service www.pcgs.com
Numismatic Guaranty Corporation of America www.ngccoin.com
Endnotes
1. The American Numismatic Association (ANA) maintains the distinction of being one of
the very few organizations in the United States to operate under a charter. The purpose
of the organization, as stated in its federal charter, is to advance and promote the study
of coins, paper money, tokens, medals, and related numismatic items as a means of
recording world history, art, economic development and social changes, and to promote
greater popular interest in the field of numismatics. On April 10, 1962, the Congress
passed a second act making the ANA a permanent and perpetual nonprofit, educational
organization. Today, the ANA maintains a library with more than 50,000 reference
materials available for loan to members free of charge.
2. Handbook of United States Coins with Premium List was written by R.S. Yeoman, Lee F.
Hewitt, and Charles E. Green. A Guide Book of United States Coins was written by R.S.
Yeoman and edited by Kenneth Bressett. Whitman Publishing, LLC of Atlanta, Georgia,
produces both of these publications. The Handbook of United States Coins focuses more
on wholesale prices. A Guide Book of United States Coins focuses primarily on retail
pricing.
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