Rare Coin Portfolios Outperforming Equities

by Phillip Morton, Investors Offshore.com

30 August 2006

Rare US coins can provide the perfect alternative investment to ride out periods of falling equity markets and inflation, according to industry experts.

Industry research has shown that rare US coins tend to perform well during periods of high inflation. As such they may hedge interest rate sensitive investments such as bonds and bills. Adding coins to an investment portfolio also tends to lower overall portfolio volatility - an important consideration for those with investments in small and mid-cap stocks or those who have allocations in private equity.

Over the past 35 years investment grade rare US coins have enjoyed a 12.7% compounded annual rate of return.

“On a ten-year moving average basis, rare coins returns are negatively correlated with equities, thus providing a potential hedge against major down ticks in stock markets,” noted Gary Knaus, President of Numismatic Investments Corporation, whose firm specializes in selling research-based portfolios of prospectively undervalued rare US coins to accredited investors.

“Investment grade coins we identified as undervalued have collectively gone up 13.83% over the past ten months,” stated Knaus, “and those portfolio coin returns were substantially higher than for equity markets over the same period.”

Those increases were also higher than for the rare coin market as a whole, which had a 5.49% return over the past ten months.

Numismatic also said that investors should have no concerns over liquidity in the rare coin market. Coins that have been certified by the two major independent grading services are readily marketable and can be sold directly to dealers or via auction. Coins also trade on a sight-unseen basis on the two independent electronic dealer networks, which at any one time typically have $800 million in open dealer bids.

Furthermore, rare coins can qualify for tax advantages, allowing coin investors to swap rare coins that have appreciated in value for rare coins that may be undervalued without incurring realization of a gain.

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