Coin investing: How rare coins can serve as a portfolio hedge

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By Douglas LePre, Senior Portfolio Manager at Blanchard and Company, Inc.

Today’s rare coin market has the highest number of active investors looking to diversify their financial portfolios than any other time in history, and each of them has entered the market with various goals. Some are looking for gains, some are building legacies to leave for their heirs, and some are just looking for a safe haven from equities, the dollar, and the banks. Regardless as to their motivation, investors are looking at rare coins as important investments, and certain segments of this market have proven to be a great hedge for peoples portfolios.

Historically, many investors looking for a hedge have turned to the big three precious metals: silver, gold, and platinum. But these markets have dramatically changed over the past five to 10 years. So the question becomes how should an investor hedge a traditional portfolio while maintaining liquidity and keeping volatility at bay? The dictionary defines a hedge as: an act or means of preventing complete loss of a bet, an argument, an investment, or the like. So, a hedge really isn’t about growth as much as it is about providing stability when markets become unstable. The rare coin market holds far more hedge tools that most are aware of. Here are a few of the most efficient:

Semi-Key Date Rarities

Semi-key date coins are exactly what they sound like. They are coins that are considered too rare to be classified as generic but are still not as elusive as the rarest key dates. Every issue has its semi-key dates. Not only are they fun to research, but they work especially well as a hedge.

Private and Territorial Gold

During the California Gold Rush, miners were challenged with discovering safe and economical means of getting their gold to the East Coast for assay and coining. The desperate need for a branch mint had been outweighed by a combination of politics and sectional rivalries. The federal government refused to authorize a mint for any of the gold mining areas. While the U.S. Constitution expressly prohibited the states from issuing their own money, there was no law against individuals doing so, hence the existence of this very intriguing portion of the market. Even with the decline in the value of gold over the past four years, the values of these types of coins have remained steadfast.

Carson City Coinage

Carson City coinage has always had the ability to stand on its own and has never had to rely on a market maker in order to achieve its status. Simply said, this is an issue that is appealing to both investors and collectors alike due to its amazing history, popularity, and rarity. It remains very steadfast in the market, including silver dollars or gold issues such as eagles or $20 Liberties.

Owning anything from the Carson City Mint largely ensures its equity is safe.

These are just a few of the areas in the market that can fill the need for a hedge tool without the volatility that exists in the equities. The process of finding what to purchase first starts with identifying the motivation for the buy before ever spending a dime. A trusted professional can help.