Although coin collecting has been a popular hobby among many for years, there are a far lesser number of those willing to dedicate the time and study to collect rare coins for investment purposes. The truth is that investing in rare coins isn’t rocket science, but for those who buy as a hedge against inflation or any other reason, the key words are patience, determination, and research. In fact, there isn’t a rare coin investor who doesn’t have still more to learn about the field. Fortunately, along with the guidance of a knowledgeable and experienced rare coin dealer, investing in rare coins can be very rewarding, financially and otherwise.
More Than Face Value
The first issue to consider before buying any rare coins is to determine whether you want to invest in coins for their melt value or their collectible value or numismatic value. The melt value is simply the value of the metal that the coin contains. On the other hand, coins that a purchased for their collectible or numismatic value, which are priced on factors like the type of coin, the year it was minted, the place it was minted, and its condition – or “grade.” Rare coins are most often valued for their collectible value since they don’t contain as much precious metal as melt value coins.
Running Into Trouble
One of the first problems that buyers of rare coins often encounter when making investments is with a coin’s grade. Although there are some factors in the grading of a coin such as “overall appearance” and “eye appeal,” these are almost entirely subjective, others require the services of an expert, and even then you need to be careful of who is calling himself an “expert.” Dealers such as Monaco Rare Coins make a reputation on such specialties as grading, so it’s easier to trust.
The grading of a coin includes the analysis of several criteria, the most important being the quality, the rarity, the interest factor, and the liquidity factor. Making matters even more complicated, over the years the distinctions between coin grades have become finer and finer. There are also different scales that professional graders use to determine grade, so it’s often just a matter of opinion as to the value of a coin.
Despite this confusion, grade is something that must be paid careful attention to, since only slight variations in grade can result in thousands of dollars in value differences among coins.
Today, there are several professional grading services in the United States: the Professional Coin Grading Service (PCGS) and the Numismatic Guaranty Corporation (NGC). ANACS is considered the third leading service. ICG is the fourth largest. In Canada there is the International Coin Certification Service (ICCS), established in 1986, and Canadian Coin Certification Service (CCCS).
Probably not as common as grading differences in determining value, but still an important issue is the matter of fakes. You can almost always assume that whenever there is something valuable at stake there is someone out there making fakes to take your money. This is especially true of rare coins and other collectibles, which can sometimes be faked very easily. This is another issue that is best evaluated by a professional.
More than a Business
Another problem that is very common for those investing in rare coins is to determine experts from business people. Simply put, anyone can go into the rare coin business, but this does not make them into a coin expert. Business people in the coin business are a dime a dozen. These people might talk some of the talk, and might even be able to negotiate shrewdly, but rare coin experts they are not.
What You Read is Not What You Get
An important misunderstanding that many rare coin investors have is the belief that the price they see as a coin’s value in a catalog is that coin’s real value. This is not true. The prices listed in coin catalogs should be used as guidelines only. The truth is that that only way to really get a true value of a coin is to sell it, which is to say that the value is what someone is willing to pay for it. Until that time, everything else is just an estimate, or even more accurately, an educated guess.
False Claims and Buy Backs
A reputable dealer will almost always offer buyers a buy back option on their coin investment. This gives clients a sense of security about their investments. Unfortunately, there are unscrupulous
dealers out there that purposely deceive buyers with false claims about the coins they sell as well as fail to honor buy back promises.
Reality TV Backwash
The current trend of reality television hasn’t done the rare coin business any favors. It doesn’t take long watching one of these shows to see coin owners “flipping” coins, sometimes at outrageous prices. This is about as far from reality as it gets.
Once you think you have made a good rare coin investment, expect to hold on to that coin for up to 10 years in order to realize any reasonable profit from its sale. Another important factor in determining how much you can expect to sell a coin for as well as how long it will take is the market. In a down economy such as the one we find ourselves in now, you might wait years before you can realize a profit, if ever. This is where careful buying comes into play. Once you have done a lot of good research the chances are better that you will buy a coin that will eventually bring a good return for your money.
What some dealers and buyers might consider an investment the IRS might consider a collectible, thus charging a higher rate of taxes than on other types of investments, once a profit is realized. This judgment is best evaluated by a tax professional to determine its impact on the buyer’s tax liability.
The Best Guarantee
If after you read and listen to all the advice that you get from everyone about investing in rare coins you are totally confused, join the club. The truth is that all of this can be confusing and frustrating. Take heart, however, because reliable help is available in the form of reputable dealers that are happy to help their clients and potential clients in their business.
Frankly, it’s not easy to find reputable dealers, but once you do you have found something worth its weight in gold…or rare coins even. The trick to finding a reputable dealer is to talk, and just as important is to listen to everything you can about dealers, wherever they are. Reputations among good dealers spread quickly, as does that of poor dealers. The trick is to separate the wheat from the chaff. And once you have found a winner, hold onto him for all he’s worth.