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Return on Investment: The Race to the Top

Which asset provided the best return from 2006 - 2011?

The Contestants:
Fidelity Overseas Fund (FOSFX), NASDAQ Average, Brazilian Stock Index (BVSP), Crude Oil, Gold, Silver or the Mystery Index

Click the play button to find out.

I'm sure many of you who are reading this are asking, 594% in five years, how can that be when bond funds are returning 7.5% per year? What's the trick? The trick is that this asset class is small. There isn't enough room in it for millions of investors to pour in. Or if they do then prices will be in outer space. But there is no trick about the returns. It is the result of growing demand meeting a limited supply. It is also about investing in one of the world's best growth stories: China.

As China grows more prosperous its middle and upper classes grow, too. There are now roughly a million millionaires in the country and they have a lot of buying power. At the same time China has a serious inflation problem. The supply of cheap labor in that country is tapped out. Wages are predicted to rise 80% in the next five years, according to the Wall Street Journal. In the same article a prominent Chinese analyst predicts inflation there for the next 30 years.

So people in China are looking to protect their new wealth from inflation. At the same time they now have the means and the time to collect objects that reflect their own culture. One area that is on their radar screen is Chinese coins. The mystery asset in the chart is Panda coins and the 594% performer is the Pricepedia 2000 Index of scarce Panda coins.

Briefly, most modern Chinese coins were issued (minted) in tiny quantities at a time when collecting there was not yet popular. Now that interest in collecting and investing in coins has grown the price of many modern Chinese coins has taken off. Better yet, the move up still seems to be in its early stages. Accurate information on coins is difficult to find and collectors are just discovering the truth about how many of each coin actually exist. As they do, prices adjust to reflect the new information. For instance, one silver coin that few people used to pay any attention to popped from $35 to $2,000 apiece in the last 12 months.

The opportunities to buy rare Chinese coins for a song will not last long. If you are interested in getting in ahead of the crowd and before the door slams shut you will need information. Two of the very best sources are the book, The Gold and Silver Panda Coin Buyer's Guide and the monthly price guide, Panda Pricepedia. The Gold and Silver Panda Coin Buyer's Guide is the original published source for estimates of the number of Panda coins available to collectors. The Panda Pricepedia price guide contains a monthly guide to undervalued Chinese coins + is the best English language guide to Chinese coin prices. I recommend them both to everyone interested in getting more on their money than 7.5%. Many happy returns!

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