Investing in Rare Coins: A Primer for the Novice Investor

Investing in rare coins has gained significantly in popularity over the course of the past decade as economic uncertainty has forced casual investors to consider more stable investments that don’t suffer from tumultuous economic conditions like the stock market typically does. Investing in rare coins is generally considered a bit safer than investing in stocks and bonds because the rare and often historic nature of these coins is not going to change at any time after they have been purchased. Indeed, it’s actually more likely that these coins will gain in value as they age rather than decline at all. Because their supply is limited, they also represent an excellent way to create a unique portfolio of diversified investments.

Investing in rare coins is a great way to enjoy a more diversified portfolio, and it’s a sound way to avoid the chaos that can be associated with traditional stocks and the major indices. Because many people are just discovering rare coin investing for the first time, though, they often require a bit of basic information on how to make investments, why each coin is as valuable as it is, and how they should proceed through the investment process after they’ve committed to these rare items. With a few pieces of basic knowledge, investors of all kinds can meet with great success.

Deriving Value: What Makes Rare Coins Worth So Much Money?
One of the first questions that many prospective investors ask is quite simple: Why are rare coins worth so much money in the first place? The answer to this question actually comes in two parts, as the value of rare coins is generally determined by two big indicators. Customers should understand each of these things before they proceed with their transition to rare coin investments.

1. Rare Coin Values are Driven by Bullion Prices
For any investor who has been doing adequate research and “window shopping” at trusted rare coin sites , there is probably one thing about most of these coins that stands out. That would be bullion, or precious metals used to create rare coins that are not often found in high concentrations when using the average penny or quarter.

Rare coins are typically minted in limited quantities by the United States Mint or foreign equivalent using precious metals like gold, silver, and platinum. Their high concentration of these metals makes them worth more just on their face than typical currency, especially as rare metal prices continue to surge around the world.

2. Rare Coin Values are Driven by Historic Significance and Scarcity
Rare coin investing derives its name from the fact that these coins are simply hard to find. It’s not often possible to call the nearest Mint location and ask them for any of these coins, as they’re not in active production and most locations either won’t have them in stock or certainly won’t be selling what they do have. This off-limits approach to rare coins is what contributes a great deal to their value.

Many rare coins are also quite old and many have historic significance. Coins from significant periods in American history, or coins that commemorate major events in the United States or other countries, are very rare, very valuable, and likely to increase their value over time after they have been purchased be investors. This is essentially a history-infused lesson in supply and demand: Where there is little supply and great demand, value is likely to be driven upward at a pretty rapid clip.

A Word of Caution: The Upward Swing in Rare Coins is Not Perpetual
While it’s true that rare coin investing gives investors access to a product that is typically far more stable and valuable than the average stock or market index, it should also be noted that these investments are not immune to fluctuations that can sometimes find even the most valuable coins declining in overall value. These fluctuations are partly driven by the economy, at least in indirect ways, and they will have an impact on the overall value of an investor’s portfolio in both good and bad ways.

One of the primary factors that can affect the value of rare coin investments is the value of the bullion with which the coin was made. Because metals like gold have been on the upswing for many years, coins have enjoyed unparalleled growth in value that has really benefitted their investors. That’s especially true for coin investors who got into the game long before the current upswing in values.

The coin market itself also derives a bit of its value from the PCGS3000 rare coin index. This index is pegged to the value of precious metals and to other factors, and can have wide-ranging effects on the values of coin portfolios throughout the country and around the world. The index has experienced great growth in recent decades, though it is not unheard of for the PCGS3000 to through a period of contraction, and for the value of rare coins to decline as a result.

Healthy Investments Begin with a Reputable Rare Coin Dealer
Unlike stocks and bonds, customers can’t simply log into their bank account and make quick purchases of rare coins that will maximize their investment portfolio’s potential. Indeed, these cons must often be purchased at trade shows or through a proxy that works with a rare coin investment firm. These firms come in a number of shapes and sizes, but there are a few key details to look for when choosing a firm that will dictate whether they’re a good investment partner or a shady operation that simply shouldn’t be trusted with precious investment funds.

1. A Generous Return Policy
Getting into the investment game, especially when it involves rare coins, is a learning process for many investors. It can be a period of great uncertainty, unfortunate mistakes, and other mishaps. The best rare coin investment firms understand this very well, and that’s why they offer return policies that often stretch between 14 and 30 days from the time that a customer placed an order for one or more rare coins. If a customer realizes they’ve made the purchase in error, or they’re not satisfied with the coin, they will be able to send it in for a refund or an exchange. This is a far superior and more trustworthy approach than an “all sales are final” policy.

2. Coin Grading is Conducted Independently
The goal of rare coin investment firms is to act as a dealer, and that means customers should look for companies that separate their dealing from the grading of coins. Grading itself could typically be called quoting, or estimating the overall price and value of the coin being sold. Investment firms that do their own grading have a tendency to overstate the price of the coin being offered, which can cause customers to enjoy a far lesser return on their initial investment than they otherwise would. When these two key services are separated, customers get a more trustworthy and high-value investment that will treat them well for a far longer period of time.

3. Look into Trade Industry Verification
Rare coin investing is generally governed by one of two major bodies, the largest of which is the American Numismatic Association. The second body, known as the Professional Numismatists Guild, conducts many of the same verifications performed by the ANA. Together, both organizations task themselves with finding the most reputable rare coins dealers who will give their customers the widest selection, the best values, and the healthiest long-term prospects for investment growth and an increase in overall value. The seals of either organization on an investment company’s website should come as a welcome sign and a source of trust.

Long-Term Outlook: A Healthy Investment for New Investors
It has already been noted that rare coin investing can lead to a great reduction in risk for most investors when compared to traditional stocks, bonds, and investment markets, and that looks to remain true over the course of the next several years. Because most coins count on a healthy gold, silver, or platinum market to derive a significant amount of their value, it’s likely that prices will grow or remain stable while the economic recovery continues to creep along at a slow pace.

Though gold has shown recent signs of stability and even decline, the price of both silver and platinum has increased in recent months due to an increase in demand around the world. Gold itself is still very near record highs, and that bodes well for rare coins. Furthermore, the historical nature of rare coins means that their real historic value is not going to decrease at all after purchase. Given the tiny fluctuations expected in precious metals over the long term, it is this historic value that may actually help coins blunt any negative effects that result from those fluctuations. All told, the market is healthy for both new and seasoned investors who are looking to diversify and enjoy a healthy return on their investment over time.


Investing in Rare Coins: A Primer for the Novice Investor
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