The Profitable Joy of Rare Coin Investing

The Profitable Joy of Rare Coin Investing
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Coin collecting is perhaps the world’s earliest hobby. People have been holding on to coins for their precious metal value for as long as there have been coins. Everyone with a coin collection hopes that it will one day gain in value, but a true collector hoards coins simply for the sake of enjoying them. A coin investor on the other hand, is motivated by profit. Although investors may derive enjoyment from possessing coins of numismatic significance, their primary objective is to find and acquire coins that have the greatest potential for price appreciation. Investors in rare coins frequently pay a premium to acquire them. This premium reflects the scarcity value of coins. Rare coins may be in in short supply because they are new and relatively few of them were originally minted. Their scarcity can also be attributed to them being among a few survivors that were minted a long time ago.

Rare coins are a joy to own, and a carefully selected collection of valuable rare coins can across time easily outperform a portfolio of traditional paper investments. The key to profiting with rare coins is in the selection process. For the serious investor, enthusiasm for the rich history of a coin needs to be tempered by a mature appreciation of the practical aspects of rare coin investing. An ancient coin of limited mintage that happens to be pleasing to the eye may not necessarily be so valuable or become a good candidate for capital appreciation regardless of how long it is held.

There are many factors that go into determining the long-term investment potential of rare coins. One of these factors is the amount of gold, silver or other precious metals to go into minting them. The higher the bullion content of a coin, the more likely its value will track the market price of the precious metal itself. The investment value of rare coins made from gold will commonly fluctuate along with the price of gold.

Beyond the bullion value (melt value) of a coin is its numismatic value. The numismatic assessment of a coin represents value in excess of its face value or bullion value. The numismatic value of a coin can come from its historical significance, its exceptional condition, or the fact that collectors simply desire it.

Gold and silver coins tend to be the most popular among investors. Part of the reason for this is that information concerning the price of the precious metals in them is readily available. If the quantity of gold and silver in a coin is knowable, then it is easy to estimate the value of that coin going forward over time. One need only multiply the number of ounces of precious metal in a coin by the price per ounce of that precious metal to estimate the coin’s value. Investors that deliberately buy and accumulate gold and silver coins bearing the smallest numismatic premium are in essence making a proxy investment in gold or silver. For this reason, it is important for potential investors to realize that it is possible that their investments in rare gold and silver coins can subject them to the same risks and rewards that investors in physical gold and silver undertake.

Investors that wish to profit from the extrinsic or numismatic value of rare gold and silver coins are making a bet on the future collector’s appeal of those coins and are generally less interested in the long-term trends that influence prices of gold and silver. Investors in this classification are advised by experts to either do the work of knowing their coin grades or make sure that they have access to experts such as the folks at Monaco who can accurately and expertly grade rare coins. In this realm, condition is everything. The condition of a coin has much influence over its future investment prospects, therefore rare coin investors are encouraged by experts to buy the best quality in terms of grade they can afford. If one cannot afford to purchase the highest grade among gold coins, then they should consider buying the highest graded silver coins. If one cannot afford the best gold coins, they should buy Gem silver dollars. If one cannot afford Gem silver dollars, they should consider buying Gem Mercury dimes, and so on. The philosophy behind this strategy is that it is preferable to be someone that never settles for less than the very best. This is important because experts know that the highest graded coins perform the best over time in terms of price appreciation.

All potential rare coin investors need to remain aware that the long-term investment prospects of any coin depends upon the supply, the demand, the bullion value, and the condition of that coin. The visible supply of rare coins will change from time-to-time when coins are hoarded by collectors with long-term investment objectives, or when large collections come to market resulting from estate sales. The demand for rare coins can change either as a response to a change in the visible supply of them, or because of changes in the culture that either enhance or detract from the appeal of specific coins. With respect to coin grading, it is useful to know that an organization known as The Professional Coin Grading Service publishes something called the PCGS 3000 Index which is a composite index that tracks a moving average of the fluctuations in the value of a fixed portfolio of rare coins. The PCGS 3000 is a useful tool for investors as it helps them with the timing of their purchases and sales of coins.

People commonly start a coin collection by putting aside the few specie of hard currency found interesting to them within the pocket change they accumulate from every day. Over time, the random treasures they obtain from coins found within circulation are insufficient to satisfy their drive to acquire more. At this juncture, they become hobbyists, and may accumulate more coins by trading with other collectors or by attending coin shows or visiting dealers. Some of these hard-bitten collectors become serious investors who use the profits from their trading to finance the purchase of still more coins. For many of them, investing in rare coins is more than a hobby or a business. It’s an all-consuming passion.

Links to Relevant Resources:
The Professional Coin Grading Service PCGS 3000 Index