In an attempt for a collector or investor, often the question is what should be the strategy to buy coins. There are various options available and given the limited resources, should one maximize by buying only particular type of coins or should be buy in bulk or should you buy certain types of proof sets. There are multiple tips one would receive, but these should be taken with a pinch of salt.
In this article I am putting out some of the tips and the pit falls of such strategies. I personally believe just like stock market, even in coin collecting it pays to diversify and the markets are more irrational and the demand supply is more unpredictable.
On Proof Sets:
This section tries to explore the common strategies that are advised and the common pit falls. The next section deals with come of the pit falls with the circulation coins.
Buy Proof Set of Popular figures or International Appeal:
Often I am told that buy this particular set as it is a popular leader or has international appeal. The best buys in these cases were Indira Gandhi, Saint Alphonsa, Mother Teresa, Louise Braille etc. Yes buying these sets will definitely give you good returns; however these are not the sets that have appreciated maximum.
Buy Older Proof Set as these are in limited quantity and less available:
True to an extent, the older Sets of 1964 to 1980 have given handsome returns. However this is not always true, there are quite a few older UNC sets that go at par with the current UNC sets. Most of the UNC Sets from 1972 to 1976 go for around Rs 4000 to Rs 5500, that’s the price of some of the current sets of 2010. Yes one would have paid quite a low amount for these sets, however even if you factor year on year compounded returns the returns on these sets would not be same as the current sets.
Buy VIP Sets:
VIP sets have definitely given great absolute returns. However one has to note that the acquisition cost of such sets is quite high. These sets cannot be got directly from mint. They have to always be purchased from the Dealers who get it from the delegates who are given a complementary copy of the set at the time of release. By the time the sets hit the market, the price is already high. So if the VIP sets go for 3 times the proof sets, remember while acquiring them one would have paid 4 times the values of proof sets. The number of VIP sets is definitely much less than that of proof sets. Most of times these are for keeps and do not come back into the market as often as the Proof Sets. However the high cost means they are less liquid than then Proof Sets. Plus the velvet cover is more prone to damage if not stored with care. In this context the Proof Sets are relatively easier to store. Also the space required to store the VIP Sets is huge. On the current sizes, One VIP set takes the space of nearly 10 proof Sets.
What Sets have given great returns?
Surprisingly non-descript sets of sets that were not in much interest are today quoting a huge premium than others. The notable ones being Saint Tukaram and Saint Dnyaneshwar followed closely by Sri Aurobindo, Deshbandhu Chittaranjan Das, Bhagwan Mahavir 2600th Janm Kalyanak, Chhatrapathi Shivaji. These sets issued around 1998 to 2002 go for a much higher value than the Indira Gandhi or the older sets of 1970’s & 1980’s
Conclusion:
There is no sure shot answer to what will gain in value. The best way like in stock market is to diversify and try to complete one theme. These would definitely give good steady returns. Keep in mind that collecting such a thing would require deep pockets.
On Circulation Commemoratives:
This section tries to explore the common strategies that are advised and the common pit falls.
Buying Packets of 100’s:
It need not be 100’s it can even be 10’s or 25’s or 50’s. Although a good idea, the cost of acquiring is a key thing. Plus the storage aspect. If you are buying packets one need to factor in the space required.
Note:
Buying “X” as its Rare now:
One will find inputs that a particular coin is rare and you buy more of it. Here again the cost of acquisition is of importance. Most of the coins by the time they are identified as rare, the price is already sky high. So the actual returns are less. Plus there is huge hording amongst dealers on the coins which are rare and they drive the prices up artificially. There is a catch 22 situation. Normally when the coin hits the market, it’s at high price. At this point one does not know if the coin is rare or normal. After a few months, if the coin is plentiful, the prices drop. If the coin is rare, the price shoot up further. So if one adopts the strategy to buy at the time of release, then one ends with all coins that are purchased at high price. So the over all return is relatively low. On the other hand, if one waits, then most of the coins can be got cheaply, however now the prices of the actual rare one has shoot up sky high. So if one buys this the over all returns are still low. There is very little way to beat the dealers, one has to be totally into the game to win it or at times pure lucky. Just to point out, the Tilakji coin was going for Rs 700 just when it was withdrawn in 2006 and is now [2011] going for around 2400, 4 times. So are most of the other Rs 5 or other deno coins that were purchased in 2005-2006 for Rs 10-15 are today going for Rs 40 to Rs 60. The only exception in recent times that I can think of is the Rs 5 Cross of 2007. It hit the market sometime around 2008-2009 and was doing around Rs 100 then. Today in 2011 it’s going for around Rs 1000. However will this coin appreciate any further or will remain at this price is hard to tell for now.
Conclusion:
Here again, its good to build a UNC set of collection. However rather than focusing on certain set of coins, keep a close watch on the market, and buy periodically. First focus of current coins, buy them in multiple quantity depending on how much one wants to invest. This may mean uneven investment as some years the number of commemoratives is huge compared to other years. One cannot loose track or discontinue in between.
Remember buying is just one aspect. Selling the coin is when one actually makes the returns. Selling is not an easy job and many a times it would take away a substantial portion of the returns. Read the article on selling to understand this aspect.
Often I am told that buy this particular set as it is a popular leader or has international appeal. The best buys in these cases were Indira Gandhi, Saint Alphonsa, Mother Teresa, Louise Braille etc. Yes buying these sets will definitely give you good returns; however these are not the sets that have appreciated maximum.
Buy Older Proof Set as these are in limited quantity and less available:
True to an extent, the older Sets of 1964 to 1980 have given handsome returns. However this is not always true, there are quite a few older UNC sets that go at par with the current UNC sets. Most of the UNC Sets from 1972 to 1976 go for around Rs 4000 to Rs 5500, that’s the price of some of the current sets of 2010. Yes one would have paid quite a low amount for these sets, however even if you factor year on year compounded returns the returns on these sets would not be same as the current sets.
Buy VIP Sets:
VIP sets have definitely given great absolute returns. However one has to note that the acquisition cost of such sets is quite high. These sets cannot be got directly from mint. They have to always be purchased from the Dealers who get it from the delegates who are given a complementary copy of the set at the time of release. By the time the sets hit the market, the price is already high. So if the VIP sets go for 3 times the proof sets, remember while acquiring them one would have paid 4 times the values of proof sets. The number of VIP sets is definitely much less than that of proof sets. Most of times these are for keeps and do not come back into the market as often as the Proof Sets. However the high cost means they are less liquid than then Proof Sets. Plus the velvet cover is more prone to damage if not stored with care. In this context the Proof Sets are relatively easier to store. Also the space required to store the VIP Sets is huge. On the current sizes, One VIP set takes the space of nearly 10 proof Sets.
What Sets have given great returns?
Surprisingly non-descript sets of sets that were not in much interest are today quoting a huge premium than others. The notable ones being Saint Tukaram and Saint Dnyaneshwar followed closely by Sri Aurobindo, Deshbandhu Chittaranjan Das, Bhagwan Mahavir 2600th Janm Kalyanak, Chhatrapathi Shivaji. These sets issued around 1998 to 2002 go for a much higher value than the Indira Gandhi or the older sets of 1970’s & 1980’s
Conclusion:
There is no sure shot answer to what will gain in value. The best way like in stock market is to diversify and try to complete one theme. These would definitely give good steady returns. Keep in mind that collecting such a thing would require deep pockets.
On Circulation Commemoratives:
This section tries to explore the common strategies that are advised and the common pit falls.
Buying Packets of 100’s:
It need not be 100’s it can even be 10’s or 25’s or 50’s. Although a good idea, the cost of acquiring is a key thing. Plus the storage aspect. If you are buying packets one need to factor in the space required.
Note:
- Buying lots of 100’s does not mean one be lucky and get some error [miss-struck] coins. The dealers have an uncanny ability to remove such coins and repackage them. So in a lot of 100, one will just have 100 coins. Buy from reputed dealers, as some dealers will pass of sparingly used coins as UNC. Even the RBI pack of 100 when bought from dealer will generally have the coins replaced and error coins removed.
- Buying older coins. Refrain from buying mixed lots. The mixed lot of coins will load you will huge number of coins that are common and only few coins that are relatively rare. This will not help build one a collection.
Buying “X” as its Rare now:
One will find inputs that a particular coin is rare and you buy more of it. Here again the cost of acquisition is of importance. Most of the coins by the time they are identified as rare, the price is already sky high. So the actual returns are less. Plus there is huge hording amongst dealers on the coins which are rare and they drive the prices up artificially. There is a catch 22 situation. Normally when the coin hits the market, it’s at high price. At this point one does not know if the coin is rare or normal. After a few months, if the coin is plentiful, the prices drop. If the coin is rare, the price shoot up further. So if one adopts the strategy to buy at the time of release, then one ends with all coins that are purchased at high price. So the over all return is relatively low. On the other hand, if one waits, then most of the coins can be got cheaply, however now the prices of the actual rare one has shoot up sky high. So if one buys this the over all returns are still low. There is very little way to beat the dealers, one has to be totally into the game to win it or at times pure lucky. Just to point out, the Tilakji coin was going for Rs 700 just when it was withdrawn in 2006 and is now [2011] going for around 2400, 4 times. So are most of the other Rs 5 or other deno coins that were purchased in 2005-2006 for Rs 10-15 are today going for Rs 40 to Rs 60. The only exception in recent times that I can think of is the Rs 5 Cross of 2007. It hit the market sometime around 2008-2009 and was doing around Rs 100 then. Today in 2011 it’s going for around Rs 1000. However will this coin appreciate any further or will remain at this price is hard to tell for now.
Conclusion:
Here again, its good to build a UNC set of collection. However rather than focusing on certain set of coins, keep a close watch on the market, and buy periodically. First focus of current coins, buy them in multiple quantity depending on how much one wants to invest. This may mean uneven investment as some years the number of commemoratives is huge compared to other years. One cannot loose track or discontinue in between.
Remember buying is just one aspect. Selling the coin is when one actually makes the returns. Selling is not an easy job and many a times it would take away a substantial portion of the returns. Read the article on selling to understand this aspect.
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