Do you like holding history in the palm of your hand?
You can with coins. You can also make - or lose - a fair amount of money on them.
After two years of steep decline, coin prices have been making a modest upturn. Several coin dealers and buyers attending a recent American Numismatic Association convention in Boston reported more interest in buying coins, which is pushing up prices. So some dealers suggest that people who have not invested in coins before may find this a good time to start.
For more than 3,000 years, caesars, kings, czars, and potentates have tried to immortalize themselves or their achievements by striking coins in their own honor. For coin collectors, this egocentricity gives them a bountiful supply of memorabilia to buy, save, and occasionally sell, with hopes of a profit. Many collectors will go to great and often very expensive lengths to obtain the one rare coin needed to complete a set.
Investors, on the other hand, are usually looking for coins that stand a good chance of increasing in value. They are patient enough to hang on to a coin or set of coins for the five years or longer it takes to realize a meaningful gain. But their attachment to coins is not as deep as their attachment to the idea of making money on their investments.
Still, people thinking of investing in coins should remember one rule that applies to all collectibles: Invest in coins because you like them. People who have no interest in a collectible, whether it is art, stamps, antiques, old dolls, or coins, usually do not have the patience to keep the collectible long enough, or they don't do enough research before making purchases.
As an investment, rare coins should rank fairly low in a person's diversified portfolio. Most responsible coin dealers recommend 5 to 15 percent of your holdings, depending on your ''comfort level.'' In other words, how much of your money are you comfortable having at risk? This is something you will have to decide after examining your income and necessary expenses.
Of course, many financial planners would not recommend coins at all as an investment. But if you are an affluent investor and do decide to put some money into coins, it is possible to invest too little in them. If you are serious about wanting coins to make a difference in your net worth, having only 2 or 3 percent of your portfolio in them is not very effective. If your coins suddenly jump in value, having a small investment won't enlarge your income by much.
The less affluent may like to hold only a few - high-quality - coins that they can afford.
The length of time a coin is held is also important. Serious collectors, of course, are not concerned about time. For them, the collection is more important than its worth, and they will hold onto their coins for the rest of their lives.
For investment purposes, however, three to five years is considered a minimum holding period. While this may not seem very long compared with the collector's time frame, in investment circles five years is considered long-term. But the value of the coins must appreciate enough to cover at least the dealer's margin.
It is sometimes possible to make a lot of money on your coins in much less time. Occasionally, a particular coin or set will strike a collector's or dealer's fancy and they will suddenly push up the price trying to get what they are after. Here, an investor can make a quick profit. But most of the time the five-year rule applies.
There are a number of ways to find out about coins. One of the easiest is from books, available at many general-interest bookstores and most coin shops. They can give you a basic education in the history of coins, guidance on grading them for quality and scarcity, and a rough idea of current prices.
After you get the basics from a book or two, a good coin dealer can help with specific questions about current prices, what coins are available, and the best values. Coin dealers are listed in the Yellow Pages; or a local coin club can direct you to dealers with good reputations.
Dealers can also tell you about coin shows coming up in your area. These shows are an easy and fascinating way to meet several dealers, hear a variety of opinions, and see many different coins in one place. There are often coin auctions at these shows, so you can get an idea of current - up-to-the-minute - prices. Who pays for IRS audit
If a federal income tax return in audited by the Internal Revenue Service and the claims are proved correct, who pays for the accountant or tax lawyer hired to represent the taxpayer? We were audited this year, as our church contribution was questioned. It cost us $200 for a certified public accountant to represent us at the IRS office and show that our return was correct. Does the IRS pay this , since we were correct? - L.H. Sorry. This is one place where Uncle Sam doesn't pay for his mistakes, at least not completely. While you have to pay the expense for an audit, it is deductible on the income tax return filed next year. So if you are in the 40 percent tax bracket, for instance, you would be able to save $80 of the $200 spent defending your deduction.