Today’s smart investors know that the best way to create a long-term portfolio with real performance benefits is to pursue a great amount of diversity. Increasingly, that means turning toward nontraditional investments, like rare coins, to enjoy a bit of added security and an overall reduced risk when compared to traditional stocks, mutual funds, and options. Rare coin investing has taken off in recent years, driven largely by a desire to blunt the wild, up-and-down swings of traditional stock market indexes both in the United States and around the world. Getting started with these investments is easy, but there are a few careful considerations to be made before turning to rare coins as a way to sufficiently diversify the average investment portfolio.
1. Be Aware that Bullion Does Not Necessarily Indicate Rarity
One of the biggest misconceptions among today’s consumer sis that the presence of a high bullion concentration in purchased coins indicates their rarity. Unfortunately, that’s just not true. Many coins with a large amount of bullion are actually quite common, including options like the American Eagle coin and the Canadian Maple Leaf counterpart available from Canadian dealers. Indeed, the “rare” in rare coins means those coins that are older, no longer in production by any mint, and thus hard to find. In this case, it is the literal rarity of the coins that allows them to hold value and secure an investment portfolio against both long-term and short-term losses.
2. Understand the Nature of Coin Grading and Look for Honest Assessments
Investing in rare coins typically involves actually purchasing the coin and storing it in a home safe or vault, or even a safe deposit box at a local financial institution. That means investors will actually have to seek coin dealers and purchase coins for a given price based on its condition and rarity. The process of actually assessing the coins’ value is known as “grading,” and it is performed individually by each dealer who has coins to sell to investors.
One of the best ways for investors to overspend and get a very little return on their investment is to purchase from a dealer with a suspect coin grading process. Investors will overprice the coin, indicate that its value is actually more than it should be, and thus scam rare coin investors in a transaction that is very difficult to reverse. Appropriately, these losses are hard to recoup.
The best rare coin dealers are those that have an extensive amount of experience in the industry, and those that have been certified as reputable sources of coins by a number of professional trade organizations in the numismatic industry. Without these seals of approval, consumers should be alert for suspicious coin values, suspect grading practices, and other business approaches that just don’t line up with the industry standard.
3. Become Familiar with the Professional Organizations that Certify Dealers
The rare coin investment industry is not heavily regulated by government forces like traditional stocks and bonds would be. That means that, while consumers are able to reduce their investment portfolio’s risk with these investments, those same consumers are exposed to a significant amount of risk while actually purchasing their rare cons they wish to invest in. The best way to eliminate this risk and breathe a sigh of relief is to look for one of the two major professional organizations nationwide that certify dealers and lend an air of regulation to the rare coin market.
The first of these is the American Numismatic Society, which is easily the largest and longest-lasting rare coin society in the United States. The American Numismatic Society concerns itself with a dealer’s grading process, their length of time in the industry, and their overall performance with consumer-facing operations. A seal of approval granted by the American Numismatic Society is a key way for new investors to trust their dealer, and it indicates that they’re getting a fair deal on every coin that they wish to add to their portfolio.
A second organization, the Professional Numismatists Guild, is equally concerned with dealer reputations. In fact, the Professional Numismatists Guild has even higher standards than the ANS in almost all cases. The guild operates its own website, complete with a list of trusted dealers that have met all of the organization’s intense certification requirements. Its listing of dealers can help consumers make a smart choice so that their investments perform up to their potential for the long-term.
4. Choose a Dealer that Actually Knows a Thing or Two About Their Coins
The rare coin investment industry has grown so quickly that many people have entered the marketplace without a firm understanding of the coins they sell. That actually can cost consumers, since knowing the coin can help to determine whether it’s a worthwhile purchase or a suspect investment. Companies like Monaco employ dealers who are interested first and foremost in their coins and the unique histories that they bring to the table. That means consumers will learn about the coin’s past, its composition of metals, and its likelihood of being a sound investment well into the future.
Investors wouldn’t buy a stock, bond, or option without knowing its past performance and its prospect for future growth. The same should be absolutely true of investing in rare coins. If the dealer cannot give a full and accurate description of the coin’s past production, uses, and value, then that dealer or that coin should be avoided as a precaution.
5. Understand the Potential Future Growth of Rare Coins as an Investment
Rare coins have shown remarkable stability over the course of the last 40 years, with only one significant downturn occurring over that period of time. Furthermore, their value as a strong and stable investment mechanism is likely to be maintained or enhance as the world economy continues toe exhibit signs of uncertainty and political instability. Investors should understand a few things about rare coins that determine their long-term prospects:
– Coins are “stored value” investment mechanisms, especially those coins with a high concentration of bullion.
– Rare coins tend only to get more rare with time, and this increases demand for each coin going forward. This increased demand can help protect the coin against fluctuations in the value of its bullion composition.
– Coins tend to increase or decrease in value separate from stock market performance, make them a great hedge against traditional investment losses.
With careful planning and a thorough understanding of how to invest in this unique industry, consumers can actually engage in a great deal of investment diversification. Rare coins can protect against broader stock market losses, and the unique history of each coin can help tell a story and delight investor-collectors.