Investing In Rare Coins

In today’s turbulent market, shrewd investors are right to be wary of Wall Street. The crash caused by the burst of the housing bubble was nothing short of devastating. Investors were left reeling for half a decade or more. Thankfully, many investors are finally starting to regain their senses and are ready to invest again. Those who have learned from the mistakes of the past are looking for alternatives to ordinary stock and bond markets. Investors are looking for something that they can hold on to, and know that their investments are not simply numbers on a computer screen somewhere in Delaware, but real, tangible objects of value. Rare coins offer more stability than volatile exchanges which are dominated by high frequency and highly complex trades. A rare coin is an object of real, intrinsic value.

Rare coins have two types of value, numismatic and bullion. They are diverse investments from the start. The numismatic value of a coin is its value as a piece of history, its value as a rare object, and its value as an object of cultural significance. The rarity is tied in to its quality as well. All things age. An old coin is rare, and an old coin that still shines is the rare of the rare.

The bullion value of a coin is its value simply as a metal. A gold coin will have value as gold if it is melted down. Gold prices could rise as the collectible value remains static. A rare coin may eventually be worth more as a precious metal than as a collectible item. Coins were traditionally made out of precious metals, such as gold and silver, sot it is common for a rare coin to have this sort of two-fold value.

When investing in rare coins, the key, as in all investments, is to do your research or consult with a reputable expert. Potential coin investors are going to envision a few different ways of acquiring their coin. The first is the dreamer’s way. The dreamer will dream of buying from someone who knows nothing of their coin’s value. This type of success, such as finding a rare coin at a garage sale for cheap is highly unlikely and should not be seriously considered by someone who is planning a long-term investment. The next level of informational ranking comes with someone who knows a bit about their coins value (casual investor/collector). This person will likely consult their favorite price guide and reach a sales price that is probably close to reasonable. The last option is to buy from an expert, someone who knows a great deal about their coin’s value (professional broker). Hoping to find a rare coin for a pittance at a garage sale has similar odds to winning the lottery, so it is not a sound investment strategy. The casual investor and the broker are not necessarily at an informational gap that is uncrossable. The casual investor will likely be consulting a price guide, and the broker will likely be familiar with that price guide and have a professional opinion on whether the price accurately reflects the market. The broker has another advantage over the hobbyist, in that he has a wide variety of coins to fit appropriate price ranges and the investors preference for value based on quality, rarity, or content of precious metals. Accurate pricing can be found in the PCGS price guide and the NGC price guide, among others.

The professional will have one more thing that the first two types of coin sellers lack, an expert opinion on the projected future value of the coin. This opinion will be based on numismatic value and bullion value separately and together. An expert will be able to evaluate its quality as compared to all coins. He can also (crucially) evaluate its quality as a member of coins of similar rarity. The two levels of rarity are the item that an expert broker brings to the table, because an amateur, no matter how much research he does, will never see the range of coins that an expert sees. An amateur will know his coin better than his wife’s face, but he will have little knowledge of how his coin compares to others. An expert will know the coin world as a whole, and see how this coin fits into it. He can see the forest, and he can see the trees too.

A professional broker will charge commission on the coin. This may seem like a downside, but remember the alternatives. With $30,000 to invest in “garage sale needle in the haystack” coins at a 1:500,000 chance (a generous estimate) of finding a coin for cheap, the rate of return is negative. Buying from a hobbyist gives you an extremely limited selection. The hobbyist will also potentially have an emotional attachment to his coin, leading him to ask more for his coin than its true investment value. A broker will ask a fair price for the value of the coin and a fee for his services, which are valuable.

Quality is a key consideration in coin investing. A mint quality coin will hold its value far better than an inferior quality coin. Remember, there are two levels of rarity in coins. The first level is the class, or type, of coin. That is to say, Walking Liberty half-dollars or Mercury dimes from the first half of the 1940’s are a great class of coin to invest in. Within these types of coins, however, individual coins will vary vastly in quality. A Mercury Dime may be more rare than a Walking Liberty Half dollar, but a Mint condition Walking Liberty Half Dollar may in turn be more rare than a ‘good’ (10% of detail visible) condition Mercury Dime. It is important to pay attention to these intersections. This is a further reason why an expert’s ability to identify individual quality is crucial.

Because gold prices are dropping, there is the potential for an intersection between the numismatic and bullion value of rare coins that could allow a buyer to purchase a coin that is dropping in gold value from a buyer who purchased it for bullion and make a profit through the rising numismatic value, which, because of its esoteric nature (it is often classed with gems and art as an investment of the wealthy) weathers the storms of middle class finances better than the stock market.

A final consideration is liquidity. The distinctive thing about the investing in public stocks is that the investments are almost as liquid as cash. Realizing profit on a rare coin presents a bit more of a challenge. Any buyer of a rare coin will need to go through the complex evaluation and research process described above. Making contact with the owner of a desired coin can present a great challenge. Again, this is where the skills of a broker are nothing short invaluable. When making an investment, it is crucial to realize the profit when the time to take profit has come. Although it is entirely possible that coin investors will place their rare coins in a safe deposit box to be held for generations, most investors will wish to translate their investments back into cash for spending or for some other investment opportunity. They will also need to be able to do this at the right time, because, although rare coins may be stable, the next investment opportunity may be such that “time is of the essence.” When a coin has been purchased using a broker initially, the same broker should be able to help the investor take his profits when the time has come.

Investing In Rare Coins
5 (100%) 4 votes