January 26, 2007, Newsletter Issue #51: Coins vs. Stocks

Tip of the Week

Money and stocks. Stocks and money. Like love and marriage, they go together. But, you think, what if I avoid the roller-coaster and the tech bubble? What if I start collecting coins to invest? I'm investing my money anyway--I might as well invest directly in money.

If you believe you're going to get rich without risk by buying a collectible coin or bidding on every Chinese or United States coin you can find on eBay, you probably staked a bushel of clams on MyCoolDotCom.com in 2000.

The metal in your coins directly affects the value of your coins. While gold endures, how much people think it's worth fluctuates, and so does the worth of your gold bullion dollar or Ireland euro coin. Some other cautions in coin investing:

* Remember Worldcom? Coins can be forged too, or values inflated. "Creative accounting" is as common with coins as it is with Fortune 500 companies.
* Like stocks and money, coins obey the laws of supply and demand. If there are too many Ireland euros flooding the market, yours won't be worth as much in the short term. Do you have the ability and discipline to hang on to your collection long-term?
* Experts believe only a small percentage of your portfolio hsould be allocated to coins, say 10-15 percent. For many investors, that may be too high.
* If you're young with a high risk tolerance or older and financially established, you're in a better position to gamble on speculative investments such as the collectible coin.
* As you would with any other investment, track financial data, "balance sheets" and long-term projections. While your rare old coin may be an excellent investment now, how much will it be in the future? Has it been preserved? What are the pricing trends? Know where your coin is going as well as where it's been.

Investing in stocks and investing in coins require time commitment and devotion. The difference is that unlike stock investing, coins can be a hobby. So while you can't separate stocks and money, you can collect coins for fun and profit without worrying about the next recession.

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