18 May 2021
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It’s unlikely anyone has amassed a coin collection without at least casually considering its future value. But is investment right for you and what pitfalls should you look out for? Find out in this special guide to coin investment.
Coin investment: what you need to know
If investment is part of your collecting plans, then there are a few things you should understand and keep in mind, before wasting your time and money. Use our checklist to ensure you're on the right track with your coin investment plans…
Is investment right for you?
Numismatic material is not a prudent investment for everybody.
If you think you’ll have a need for the money you put into coins or currency within several months, or even several years, it’s probably best to avoid them as a short-term investment. Remember…
- Coins are a long-term holding, with the best gains coming over a period of many years.
- Coins and currency are a hedge and should be part of a diversified portfolio.
- Putting all, or even most, of your money in one place is rarely a wise move.
- Make sure you can comfortably meet your ordinary living expenses before you commit funds to any long-term investment, including coins and currency.
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Be sure of what you’re buying, and from whom you’re buying it
When purchasing rare coins and currency, one of the most important considerations is their grade. Often, their value is dependent on their grade and small differences in quality can translate into large differences in value.
Several independent services provide an impartial opinion on the grade of a coin or banknote.
These services then seal the coin or note in a plastic container or holder with its grade indicated. The process is called certification, and it may provide your best protection against buying an item that is overgraded (and consequently overpriced).
Two companies which offer widely recognized and highly regarded grading opinions on coins are the Numismatic Guaranty Corporation (NGC) and the Professional Coin Grading Service (PCGS).
Watch out for ‘modern rarities’
Many newly minted coins are marketed through advertisements and direct mail pieces as semi-numismatic coins or private rarities. Usually these take the form of commemorative coins struck for a special event or to honour a specific political or folk hero.
These pieces are sometimes touted by marketers as good investments because of their theme or restricted low mintage, but many modern issues end up valued at close to their bullion (melted) value.
If you like the theme on the coins, admire the beauty of the design, or would like to own them as a souvenir then buy them. However, if your goal is capital appreciation, or making a profit, then you’re probably better off avoiding this type of material.
Beware of bargains
The biggest and costliest trap many new collectors get caught up in is the bargain price, good deal, or the ‘something for nothing’ offer.
No dealer gives something away substantially under its true market value. Every dealer is in business to make money and should be allowed a reasonable profit on each transaction.
If you are offered merchandise priced significantly ‘under the market’ it’s probably safe to assume that the goods are overgraded, overpriced or misrepresented in some way.
Do not misinterpret the message here. It pays to do comparison shopping.
If you are buying certified coins or banknotes, there may be some price variations between different dealers. Simply because one dealer can or will work on a slightly lower profit margin does not indicate that anything is wrong.
Remember that in the great majority of cases, buying a certified coin or banknote offers substantial protection against buying a flagrantly overgraded item.
If one dealer is selling his certified pieces at 5 or 10% less than another, that is no cause for suspicion. But if a dealer is offering uncertified high-grade pieces, or certified material from services other than those recognised by the industry, at prices ‘below wholesale’ it may be too good to be true.
Reputable dealers seldom have significant price variances on high quality coins or currency that are also available from other dealers.
Learn about what you’re doing
There is no substitute for knowledge.
Like stocks, bonds, artwork or real estate, numismatics is a highly specialised field with its own terminology and ‘rules of the game.’
In the past, the greatest financial gain has accrued to those who have taken the time to read, study and learn the basics before making a large cash outlay.
Taking the time to learn about rare coins and currency, attending a few shows at which they are sold or traded, doing some research on the subject, and carefully evaluating your financial goals and personal interest can open the door to an exciting, fulfilling hobby, and could very well pave the road to possible future financial gain.
Improve your knowledge and improve your collection with Coin Collector magazine…
Coin Collector is your quarterly guide to the world of coins, packed with advice, information and inspiration to help you improve your knowledge and your collection. Purchase single issues of the magazine (either in print, whilst available, or as a digital edition) or why not subscribe to the magazine and we'll send every copy directly to your home?
Article kindly provided by the Professional Numismatists Guild
The PNG frequently distributes consumer-investor protection and education alerts for the public. One of the most popular advisories, Important Things to Know Before You Buy Rare Coins or Currency, is presented here, courtesy of the Professional Numismatists Guild.
The USA-based Professional Numismatists Guild (www.PNGdealers.org) is a nonprofit organisation founded in 1955 that today is composed of nearly 300 rare coin, bank note and bullion coin dealers who must adhere to a strict Code of Ethics in the buying and selling of numismatic merchandise.
There are two veteran PNG member-dealers in London, Stephen Fenton (www.BSJauctions.com) and Richard Loebel www.CoinCraft.com). The other long-time PNG member-dealers in Europe are Dieter Gorney in Munich, Germany (www.GMcoinart.de) and Juan Ramon Cayon Fernandez in Madrid, Spain (www.Cayon.com).
