Rare Coin Investing

Smart investors turn to hard, i.e., tangible assets during uncertain economic times. Precious commodities, e.g. silver, gold, platinum and palladium, and rare coins, are perennial investor favorites. Historical performance of these assets over many years makes rare coins (made of precious metals) a wise long-term investment. Rare coins add diversification to the financial portfolio.

Gold and silver soared to new highs in recent years. Gold prices rose two-and-a-half times from March 2007 to February 2012 ($654.80 to $1723.00). Investors, central banks and governments continue to seek a safe haven and financial stability as huge sovereign debt levels, housing bubbles and historically low (or artificially suppressed) interest rates start to rise. Rare coins deliver the desirability of precious metals as a hard asset investment. Rare coins also deliver intrinsic rarity caused by scarcity and other factors. For that reason, rare coin investing requires a patient and opportunistic approach. Investors should not expect to trade rare coins for quick profits and often rely on knowledgeable rare coins dealers.

Rare coin investment portfolio. Many investors ask how to begin to assemble a rare coin portfolio. Some people do occasionally find pleasant rare coin surprises in pocket change, but this is an unusual occurrence in today’s world. When this happens, a knowledgeable rare coin investor wears a broad grin for days: the nominal value (spending value) of the rare coin is much less than its trade value between rare coin dealers. Each rare coin is literally a bit of tangible history that coin investors may hold in their hands. Some coins are like miniature works of art, worthy of display. Extremely rare coins should be purchased with greater care. The ability to resell these coins at a favorable price depends upon another knowledgeable buyer’s willingness to purchase them. For that reason, identifying rare coins with sufficient liquidity–prospective buyer or dealer interest–is an important consideration for rare coin investors.

Knowledge is power in an active rare coin marketplace. Rare pennies and hard-to-find nickels and dimes continue to appreciate in value. Regardless of the direction of precious metals, the supply of any rare coin is static. A new buyer of rare coins must approach the market as a shrewd investor. Rare coin investing market peaks, e.g. in the late 1980s, mean a higher cost basis for investors.

Rare coin condition. Shrewd investors are often sophisticated investors, and a system to evaluate coin condition has evolved over time. Coin condition answers the question, “How does the rare coin look? Is it time-worn?” Today’s 70-point coin grading system in market use describes the state of each coin’s preservation. A “70” describes a perfect, uncirculated coin. Such a coin has never been used to pay for goods; it has never passed from hand to hand, accumulating scratches or imperfections. Details of circulated coins are naturally lost and cannot be recovered through restoration.

Today’s certification process helps dealers, buyers and sellers agree to the minute details of rare coin condition. After certification, the rare coin and written a written assessment is sealed in plastic. Certification protects and preserves the rare coin in its current condition. Certification packaging protects future buyers, too, as tampering with the sealed coin is detectable. Independent graders improve the confidence with which buyers and sellers make a market, even over a distance. Though many buyers prefer seeing a rare coin before making a decision to purchase, extremely desirable rare coins are sometimes traded this way. Certification greatly enhances the investment appeal of rare coins because the buyer is assured of the coin’s level of condition and preservation. Buyers need not rely on a dealer’s subjective assessment or suffer the resulting need to overpay for rare coins.

Rare coin buyer types. Accumulators, or casual collectors, randomly tend to save coins from pocket change. They may save jars of coins without looking for rare coins. Collectors, on the other hand, don’t acquire coins for any specific future profit goal. They value the historical importance or artistic beauty of the coin above its investment potential. Collectors like to assemble sets of coins. For example, collectors may purchase a specific coin type minted over a series of years, despite the rarity value of some of those years. As such, collectors are less likely to sell rare coins. Collections of rare coins often appear on the market as the collectors’ estate seeks to liquidate. These sales events can offer great opportunities to shrewd investors to purchase rare coins at attractive prices. Unfortunately, knowing about private collectors’ needs to liquidate rare coins is challenging.

Coin collecting was embraced by many newcomers during the 1960s. Investing in collectibles, including rare coins, was widely published as an investment strategy. Investors checked pocket change and also actively sought low mintage coins as part of a buy and hold portfolio. A greater number of people purchased government proof sets. During the challenging economic times of the 1970s, investors saw rising interest rates and experienced hyperinflation in the late 1970s. Precious metals and rare coins were acquired to hedge other financial assets against inflation or the ravages of economic uncertainty.

Rare coin investors differ from collectors: they evaluate rare coins and understate the importance of economic indicators, e.g. interest rates and inflation. They understand and appreciate the interrelationship of rare coin values and precious metals value. Some investors have little interest in the historical significance or aesthetic appeal of rare coins. They seek profit as the result of buying and selling rare coins.

Rare coin types. There are three rare coin types. “Keepsake” rare coins, e.g. those a grandfather put away in a jewelry or cigar box, contain coins that were in circulation from 25 to 50 years ago. Kennedy half dollars, with a high silver percentage, are an example of once readily available coins that have appreciated in value. “Mint,” and “Proof, Sets” are collectibles purchased directly from the U.S. government. These coin specimens are highly polished and represent exceptional quality. Proof sets may cost more than mint sets and may bear a higher resale value in the dealer market. However, the mint set may contain rare, never circulated coins. In that instance, discriminating buyers select mint sets.

Mint marks. Like other items made of precious metals, rare coins’ ‘makers mark’ or mint marks add value. In the early years of the nation, the Philadelphia mint was the country’s only coin production facility. Early coins have no mint marks for that reason; the absence of a mint mark may signify the Philadelphia mint. For a short period during World War II, Philadelphia employed a mint mark. Philadelphia minted a five-cent piece devoid of nickel–the rare five-cent piece was made with copper, manganese and silver. These nickels bear a mint mark above the Monticello dome: a slender, large “P” appears on the ‘tails’ side of the coin.

Since 1979, the Philadelphia mint has placed a small ‘P’ on coins, other than Lincoln pennies. Branch mint marks of the nineteenth century are important considerations for rare coin investors: “C” signifies the Charlotte, North Carolina mint (gold coins from 1838 to 1861); “CC” denotes Carson City, Nevada (from 1870 through 1893); “D” represented the mint at Dahlonega, Georgia (gold coins from 1838 to Confederate State 1861); “D” later came to represent the mint in Denver, Colorado (from 1906); “O” signifies the mint at New Orleans (from 1838 to 1909); “S” denotes San Francisco (from 1854); and “W” signifies West Point, New York (from 1984).

Nineteenth century mint marks are usually found on the coin’s wreath or eagle-facing side. Investor-worth twentieth century coins’ mint marks vary in location, including Indian Head penny (1858 through 1909: beneath the wreath, mint marks for 1908/1909 only); Buffalo nickel (1913 to 1938): on the reverse beneath ‘FIVE CENTS’; Roosevelt head dime (from 1946): on reverse, left of torch-base 1946 through 1964–above date from 1968); ‘Barber’ dime, (1892 to 1916) below wreath; ‘Barber’ quarter, (1892 to 1916) below eagle; ‘Barber’ half dollar, (1892 to 1915) below eagle; ‘Peace’ silver dollar, (1921 to 1935) beneath ‘ONE’.

Rare Coin Investing
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