When spending ¥1,000,000 on old coin investment, there will be a significant difference in performance after five years between someone who invests the entire amount in a single brand and someone who diversifies across multiple brands. The reason is that "the market moves independently for each brand."

Why "Diversification" is Essential in Old Coin Investment

The old coin market has characteristics that differ from typical financial investments.

In the stock market, you can see overall price movements through indicators like the Nikkei Average or S&P 500. However, the reality in old coins is that "the market is independent for each brand."

For example, just because Kan'ei Tsūhō has increased 1.5 times over three years doesn't mean Tenpō Tsūhō will rise at the same pace. In fact, it may decrease instead.

Why is this? It's because the sources of demand differ.

Buyers of Kan'ei Tsūhō include "those who want to learn about Edo period currency history" and "those attracted by the rarity of holed coins." In contrast, buyers of koban look at both "the value as gold bullion" and "the decorative value of Edo gold coins."

This fact that "the buyer demographics are different" weakens the price correlation between brands.

Therefore, in old coin investment, diversifying along three axes is key to risk management.

Diversification Strategy ①: Diversification of Brands — The Trap of "Only the Same Type"

A common mistake beginners make is concentrating funds on a single brand.

After seeing news that "Kan'ei Tsūhō is rising in the market," investing the entire ¥1,000,000 in Kan'ei Tsūhō is extremely risky.

There are three reasons for this.

1st Reason: A Brand's "Peak" Always Ends

A brand typically attracts attention for a cycle of 1 to 3 years. It's covered in the media, buyers increase, and the market rises. However, it eventually reaches a state of "fully bought."

If new buyers do not appear, the market stagnates or declines.

This turning point is difficult to predict from outside. Therefore, owning multiple brands allows you to compensate returns if one stagnates.

2nd Reason: Price Movements Vary by Grade Band

Even within the same brand, buyers vary depending on the grade (condition).

Koban with MS65 (nearly perfect condition) targets wealthy collectors. Conversely, koban with MS60 (good but has scratches) tends to target history enthusiasts.

During rising market phases, MS65 is bought first. In declining phases, MS60 might drop less.

This is because "higher grade = rarer = larger movement."

3rd Reason: Differences in the "Thick Layers" of Brands

Referencing Basic Knowledge of Old Coin Auctions, brands with a lot of transactions differ significantly in market stability from those with few.

Kan'ei Tsūhō is a "thick-traded" brand with dozens of pieces auctioned each month. On the other hand, rare local currencies might only appear 1-2 times a month.

For thick-traded brands, a single high-price auction is less likely to push the market overall. Thin-traded brands, however, may have a single auction price recognized as "the market price for that brand," which is very unstable.

Practical Diversification Example

For a beginner allocating funds in old coin investment, an allocation like this can serve as a guideline:

With this allocation, even if one lags, the overall portfolio decline is limited.

Diversification Strategy ②: Diversification of Grade Bands — "Only High Grades" is Dangerous

The value of old coins greatly varies by condition.

It's not uncommon for the price of the same brand to differ by more than double between MS65 (nearly perfect) and MS60 (good).

Knowing this, you might think, "Isn't it better to only buy high grades for greater returns?"

This is true, but the risk is also higher.

Three Risks of High Grades

Risk 1: Limited Demand

Buyers of coins graded MS65 and above are mostly wealthy collectors. This group seeks "perfection," deeming even slight scratches as devaluations.

However, when the market enters a decline phase, they hold back on purchases, judging "there's no need to buy now."

As a result, high-grade coins tend to decline rapidly in value.

Risk 2: Variability in Grading Institutions

Referencing Standards and Interpretations of Old Coin Grading, the boundary between MS64 and MS65 can depend on the evaluator's visual assessment.

A coin graded MS65 today might be graded MS64 by another institution, meaning your grade has "dropped" and its value may significantly decrease.

The impact of this "grading variability" is greater in higher grade bands.

Risk 3: Low Liquidity

Many MS65 coins undergo only a few transactions per year.

If you want to sell but there's no buyer, you’ll be forced to lower the price. This is known as liquidity risk.

This liquidity risk is higher in high-grade bands.

Mid-Grade (MS60–MS63) is Actually a Target

Looking at the entire portfolio, the MS60–MS63 grade band strikes a balance of risk and return.

There are three reasons:

  1. Thick Demand — There is a wide range of buyers, from history enthusiasts to wealthy individuals.
  2. Stable Market — With multiple items transacted each month, a single auction doesn't significantly sway the market.
  3. Upside Potential — It's a natural urge to "want better-condition coins," so many buyers gradually move toward higher grades.

Holding this band as a "core asset" and combining it with high grades (10–20%) and low grades (10–20%) is realistic diversification for beginners.

Diversification Strategy ③: Diversifying the Time Axis — The Mistake of "Buying Everything Now"

A commonly overlooked aspect in old coin investment is diversifying the purchase timing.

The mentality of "I must buy now because the market is rising" clouds investment decisions.

This is called "FOMO (Fear of Missing Out)."

An Example of Time Axis Diversification

Suppose you have ¥1,000,000 to invest.

Failure Pattern: "Use Everything This Month"

In this scenario, if the market declines the following month, all purchases would have latent losses.

Success Pattern: "Split Purchases Over Three Months"

  • 1st month: ¥330,000
  • 2nd month: ¥330,000
  • 3rd month: ¥340,000

By doing this, you can average out market fluctuations.

If the market falls, you can buy cheaper in subsequent purchases. If it rises, early purchases yield returns.

This is called "Dollar Cost Averaging."

Innovations in Time Axis Diversification in the Old Coin Market

However, unlike stocks, old coins don’t move in price daily. Auctions occur roughly once or twice a month.

Thus, the way to manage time axis diversification becomes:

Method 1: Align with Auction Cycles

Buy "1-2 items per session" at monthly auctions. This automatically diversifies the time axis.

Method 2: Adjust Purchase Timing by Looking at Market Charts

By checking price trends with market charts, you can judge whether current prices are high or low.

Buy more if prices are low; buy less if high, adjusting based on quantity standards.

Method 3: Formulate a "Reinvestment Plan"

Initially purchase a smaller amount to see how the market continues. If the market is steady, "reinvest" after 1–2 years.

This method reduces regret.

Learning from Examples of Diversification Failures

Actual market data illustrates the importance of diversification.

Case 1: Failure of Brand Concentration

In 2022, Kan'ei Tsūhō rode a market rise wave. Suppose an investor concentrated 80% of their funds on Kan'ei Tsūhō upon seeing this.

In 2023, Kan'ei Tsūhō was deemed "fully bought," causing the market to stagnate. Meanwhile, Tenpō Tsūhō, previously unnoticed, was highlighted in the media and began to rise.

The brand-concentrated investor could not capitalize on this wave, resulting in opportunity loss.

Case 2: Failure of Grade Concentration

An investor who committed all funds to MS65 koban faced the predicament that, during a market downturn, fewer buyers appeared for high-grade items.

This investor encountered a liquidity crisis, where they couldn’t sell despite wanting to.

Conversely, an investor diversifying in MS60-MS62 retained the "option to sell" even as the market declined.

Case 3: Failure of Timing Concentration

An investor who used all funds at the market peak in 2021 ended up with latent losses due to 2022's market benchmarks.

Had they made split purchases over three months, the average purchase price would have been lower, and their current valuation higher.

Balancing Diversification and Return

You might wonder, "Won't diversification reduce returns?"

That’s correct.

Concentrated investments can yield significant returns if successful. However, the damage is severe when they don’t pan out.

The degree of diversification changes based on the purpose of old coin investment:

Purpose 1: Asset Preservation (minimizing declines)

In this case, diversify in all areas of brand, grade, and time axis. Returns are limited to about 5-10% annually, but the risk is low.

Purpose 2: Balanced Approach (moderate return and risk)

Diversify among 3-5 brands, emphasize mid-tier grades, and spread purchases over 3 months. This can yield an expected return of around 10-15% annually.

Purpose 3: Growth (targeting return)

Allocate 20-30% to niche brands and new grade bands. However, this increases risk.

ITTENDO's Conclusion: Increase "Quality" of Diversification

The basics of diversification are easy to understand, but in practice, the "quality" matters.

Simply "buying multiple brands" is not enough.

What’s important are these three points:

1. Choose Brands with Low Correlation

Kan'ei Tsūhō and Tenpō Tsūhō look similar but attract different buyer demographics. Combining "unrelated brands" effectively utilizes diversification.

2. Be Conscious of "Distribution" in Grade Bands

Allocate 60% to MS60-MS63, 20% to MS64-MS65, and 20% to MS59 and below, keeping distribution by grade in mind.

3. Read "True Market" from Auction History

Avoid being misled by one high-price auction, and look at the median from multiple transactions.

Beginners might think "diversification = multiple purchases," but in reality, "diversification = a strategy to reduce risk and stabilize returns."

The old coin market has the characteristic that each brand has an independent market. Understanding this characteristic and building a diversified portfolio that matches your investment scale and goals is the secret to long-term profitability.

At ITTENDO, we keep track of the "now" in old coins based on past auction histories and market charts.

The Three Axes of Risk Management

Risk management in old coin investment has unique characteristics compared to traditional asset classes like stocks, bonds, and real estate. For effective systematic risk management, it is crucial to focus on diversification across three axes.

The first axis is "brand diversification." Concentrating investment in high-grade items of the same brand directly ties asset value to the market trend of that brand. By diversifying across multiple brand categories (Edo gold coins, Edo silver coins, holed coins, modern gold coins, commemorative coins), the impact of market downturns in specific categories can be mitigated. By studying both Basic Explanations of Edo Period Gold Coins and Overview of Modern Gold and Silver Coins, you can grasp the big picture of brand categories.

The second axis is "grade diversification." Even within the same brand, independent markets are formed by grade. Instead of concentrating only on high-grade items, diversifying across multiple grade bands spreads out the risk of price fluctuations by grade. Understanding grading systems as covered in Basic Grading Standards for Old Coins is a prerequisite for grade diversification.

The third axis is "market diversification." By diversifying across multiple market channels like domestic auctions, international auctions, specialists, and peer-to-peer trades, one can manage the liquidity risks inherent in specific markets.

Structural Measures Against Counterfeit Risks

Inherent to old coin investment is the significant weight of counterfeit risk, a unique risk absent in stocks and bonds, requiring structural management before investment decisions. Combining general principles as covered in Basic Methods for Identifying Counterfeits in Old Coins with specific countermeasure techniques as covered in Beware of Expensive Old Coins — Reasons and Reliable Identification of Counterfeits can lower counterfeit risks to manageable levels.

A practical countermeasure is structuring investment portfolios around third-party certified slab items. Certifications by international grading institutions, as covered in Evaluation of Japanese Old Coins by PCGS and NGC, substantially reduce counterfeit risk and serve as a powerful means.

Liquidity Risk and Long-term Holding Strategy

A feature of the old coin market is its lower liquidity compared to stocks and bonds. Many brands undergo trading only a few times a year, limiting selling opportunities. Utilizing the three viewpoints of market analysis as covered in Correct Reading of Old Coin Market Charts allows for preemptive understanding of brand-specific liquidity features, marking the starting point for managing liquidity risks.

For a long-term holding strategy, it is practical to center portfolios around brands with relatively high liquidity and supplement them with rare brands that have lower liquidity. High-liquid brands offer flexibility to sell at fair prices even in urgent cash-out scenarios, while rare, low-liquid brands, as cultural assets for long-term possession, enhance the cultural value of the entire portfolio.

A practical guideline involves solidifying the portfolio core with high-liquidity brands while supplementing it with rare brands, achieving a balance between risk and return. High-liquid brand candidates include mid-level Meiji gold coins or mid-level Edo period gold coins (e.g., Genroku koban, Hōei koban, Bunsei koban), which have relatively high trading frequencies and, thus, flexibility to sell at fair prices during urgent cash-out scenarios. Rare brand examples include Keicho Ōban, Shōtoku koban, and Meiji year 13 20-yen gold coins, suitable for small overall portfolio proportions (e.g., 10–20%). Attention to storage infrastructure, as discussed in Practical Storage and Humidity Management for Old Coins, is also crucial as a risk management aspect because physical preservation systems, if not robust, could lead to value loss even before market prices drop. Inserting rare brands within a long-term possession framework elevates the portfolio's cultural value.

Conclusion — Risk Management is the Accumulation of Knowledge and Experience

There is no magic formula for risk management in old coin investment. By being mindful of diversification across brand, grade, and market, implementing structural measures against counterfeit risks, and balancing liquidity risks with long-term holding strategies, risk can be reduced to manageable levels through consistent accumulation. Use the basic knowledge covered in Basic Methods for Identifying Counterfeits in Old Coins and Grading Standards for Old Coins as starting points to establish your own risk management style through market experience.

Risk management in old coin investment should focus on harmonizing long-term asset preservation and cultural asset inheritance rather than maximizing short-term profits.

The precision of risk management in old coin investment improves through the accumulation of experience and knowledge. Risk is a management target, not something to shy away from.

By managing risk with a long-term view, your entire collection activity rests on a stable foundation. Instead of reacting to daily market movements, maintain a stance that considers structural factors and long-term trends for ultimate results.