A tale of two investments.

This is a personal story about two investments. It is actually about two assets that had completely contrary developments in the long term: real estate and coins.

On the one side real estate: in 1958, my Dad bought a small plot of land in his home village. Back then, it was in a small, working class village near Vienna. He paid around € 2 per square metre. It was no more than a plain field, where a new settlement started.

He then built a house on it, that became my childhood home and place to live for more than 20 years. Although he bought the land to build a nest for us as a family, you could regard it as an investment vis-a-vis just renting a place.

Fast forward 63 years: the “village” has long become a prosperous, upper-middle class neighbourhood on the near outskirts of Vienna. My Mom and I moved to the City (sadly, my Dad died long ago), and the house was in decay.

Then I got an indecent proposal from someone to buy the property. He offered € 750 / m2 (the house being virtually worthless). After long, careful considerations – it puts enormous emotional strain on you to sell your parents’ home – I took the offer.

750 Euros made from a mere 2 Euros in 63 years equals an annual return of 9.6% per annum. Not bad. A number that most professional money managers could only dream of.

Now over to coins: My Dad – a financially highly literate man – bought collectors’ coins at the beginning of the 1980s. They were a special edition from the Austrian Mint (affiliated to the Austrian Central Bank) and had specific themes – such as Mozart’s birthday or the Pope’s visit to Austria.

They had a face value of 500 Austrian Schillings. Since they were a series of limited editions, and had a polished finish, my Dad bought them at a premium, he paid 800 Schillings apiece.

40 years later, I decided to sell this collection of coins ( in total 101 pieces). I proudly went to a coin trader and asked him what he offered me for this treasure. He said 33 Euros apiece. I thought he joked. I told him that just the face value was 36,33 Euros that I could get from the Central Bank, not to speak of the collector’s premium.

He politely said to me: That’s exactly what we do. We take it to the Central Bank. So off I went and collected the face value amount of 36,33 Euros from the Central Bank. Which meant that this “investment” lost 37% in nominal terms over 40 years.

What a gap to the investment my dad made in real estate! Fortunately, the latter was much more significant than the one in coins.

Post Scriptum: big “IF” – my Dad would have invested those 80.000 Schillings of his coins investment into Apple shares at their IPO in December 1980, guess what it would be worth today? Answer: around 1.5 million US Dollars! What a difference investment decisions can make 🙂