The Quality Premium: Stocks to Silver

Over the past few months, I have noticed an increasing interest in silver (and gold) coins – from collectors, and investors who dabble in collectibles. The reason is obvious – silver price is up by almost 35% over the past year. Moreover, some investor-collectors I know like to park some of their equity market gains in antique-bullion coins. There are some commonalities between the equity market and collectibles – sound research is one of them.

For instance, consider three seemingly identical coins in the image above – silver rupees from different years 1938, 1943 and 1944. To a layperson, they are pretty much identical except for some minor changes in design. However, any serious collector of British India coins knows that their values can vary widely – while the 1944 rupee can be purchased for a small premium over its melt value, the 1943 rupee easily goes for twice the price – due to its rarity. The 1938 rupee is even rarer – and will easily fetch 20X the price of its more common cousins. Just as you need to research a company before you invest, I suggest to collectors/investors to study what they are buying.

An interesting trend that I have noticed over the past several years is that rare items, which are already high value – trend to appreciate more compared to common varieties. Likewise, a high grade (say uncirculated) coin will fetch a premium over a lower grade coin with wear, and will appreciate more over time. Serious collectors have always been willing to pay a premium for quality, like the stock market.

Finally, there is a fourth coin, not in the image – the 1939 rupee, that is ultra-rare, and easily retails for 100X the price of the common dates, WHEN it is available! To date, in my decades as a collector, I have seen this piece just twice – on both occasions with serious collectors who would never sell. Buy and hold is true for all blue chips!