Numismatic Investing
For people like me, the main reason for collecting coins is that I have no real social life. Every night, as I sip an old fashioned, I put obscure coins into albums, giving me hours of pleasure. I also spend long hours studying the history of each coin. But I know that some people are really not into collecting, but instead, are for in it for the money. As an example, consider an investment in an uncirculated 1895O silver dollar. In 1972, it could be purchased for $550. Today, it is worth $32,000. Meanwhile there are other silver dollars that sold for $200 in the 1980's that are now worth only $80.00. Some coin investors make lots of money, while others are losers. Here are some rules for investing.
Rare coins
The first and most important rule it that the coin must be fundamentally rare. Fundamentally rare coins have the potential to increase in value. Common coins do not.
Coins in High Demand
The coin should be in demand. My grandfather, Herbert Planchet painted landscapes as a hobby. During his entire life, he only completed thirty paintings, making them exceedingly rare. In contrast, his rival, Claude Monet, created thousands of works. And yet today, a Monet is much more valuable than a Planchet. The reason is not the supply, but the demand. In coins, the Morgan Dollar series is the heaviest in demand. Only the biggest ignoramuses don't know what the Morgan dollar looks like. It is the most recognizable coin in the world. Rare dates in the series are extremely valuable. In 1921, the Morgan dollar series ended and the Peace dollar series began. Many of the Peace dollars are just as rare as some Morgans,but they are much less valuable because the series is in less demand. The most popular series to collect are Morgan dollars, and St. Gaudens twenty dollar gold coins. Only slightly behind these are Walking Liberty half Dollars, Commemorative Half Dollars, Standing Liberty quarters, Mercury Dimes, and Buffalo Nickels. These coins are regularly collected by date. Other older coins are frequenty collected by type and should also be hightly collectable, thus giving them a chance to increase in value.
Coin Grades
Some coins are rare in any grade, while others are rare due to their grade. One example is the 1884 S Moragan Dollar. Over three million were minted. In fine condition, the coins are valued at around $18, and there are tens of thousands that are available. In gem uncirculated (MS65), the same coin goes for $180,000. Only two have turned up in that grade.
Sometimes, a subtle difference in grade makes a big difference in price. An 1887O morgan goes for $350 in MS 64, but in the sublty better uncirculated grade of MS 65, it goes for $3500 -- ten times the price!
Bullion Coins
For some coins, the primary value of the coins is in the bullion price. These can include all of the common silver coins. Many of the common gold coins (as well as the new Gold Eagles and Gold buffaloes made currently by the US mint, trade at a premium over the melt value. If the values of the metals go up, these coins will go up in value. If the value for the metals go down,they will lose some of their value.
There are many coins made of silver, gold, or platinum, whose value is determined primarily by the "melt" value of the metal.
Altered Coins
There are several keys to investing besides purchasing the "right" coins. One is to make sure that you are getting authentic coins. During the 1970's and 80's, many common coins were altered (with changed dates or added mintmarks). It's important to avoid spending thousands of dollars for a worthless fake.
Professional Coin Grading Services
The other key thing is the grade of the coins. Although there are standards for coin grading, there is some range within each grade. In an effort to standardize grading, some professional coin grading services have emerged which grade and encapsulate coins. The two that are most widely accepted are the Professional Coin Grading Service (PCGS) and the Numismatic Guarantee Corporation (NGC). The original idea is that by coins would have an "official" grade and could trade sight unseen like stocks. The problem is that there is a range within each grade. An attractive MS64 coin could be more valuable than a less attractive MS64. There is also some error in the grading. There are many stories of investors who crack a coin out of a holder and re-submit it several times before getting the grade they desire.
The two grading services are not identical. For example, with modern coins, NGC seems to grade many more coins in MS69 and MS70 than PCGS, which could indicate some grade inflation from NGC. There are also many other grading services. Some grade consistently, but there are many other services that inflate the grades to the extent that they are useless.