The idea of why you should buy numismatic coins and why you shouldn’t was recently illustrated to us when we met with a customer that had a nice collection of high end certified Carson City silver dollars that he was interested in selling. He had every silver dollar that was available in a Government Services Administration (GSA) holder, including a few deep proof-like examples and VAM, or variety coins. Additionally, he had nice certified examples of Carson City silver dollars for years that were not released in GSA holders. He had clearly purchased the collection as an investment with the intent of selling it at a considerable profit. However, he was likely provided with unrealistic expectations by a coin dealer regarding the amount and time it would take to realize a profit.
Why and Why Not to Invest in Numismatic Coins
This brings us to the question of why individuals should invest in rare coins and why they shouldn’t. The primary reason should be for the love of the hobby, to own a piece of U.S. history, and to pass down the coins through the generations as a keepsake. The primary reason should not be to purchase rare coins as an investment; at least not as a short term investment. However, if you plan on purchasing collectible coins as an investment, you should consider taking note of the following factors.
The Numismatic Coin Market Can be Volatile
Collectible or numismatic coins are much like stocks, or any other asset. There are times when they’re in high demand, especially during periods of strong economic performance and high inflation, while at other times, demand and pricing is weak. While we tend to think of stock markets overheating and subsequently popping, the same can happen, and in fact, has happened in the rare coin market. Through the 1980’s, demand and prices for numismatic coins soared; however, the market topped out in 1988 and subsequently popped in 1989. The coin market subsequently struggled for several years until demand began to pick up again in 1995. Additionally, demand and prices dropped during the past two recessions; at least initially, when the price of gold and silver took a hit, along with other commodity prices. In other words, don’t expect to make a quick buck from rare coins, but rather to hold them for a considerable amount of time.
Historical Value of Coins
Not only should you not expect an immediate return on your investment, but you should also take the time to research the historical value of the coin or coins that you’re interested in. Granted, while past performance is no guarantee of future returns, this can provide some insight as to where the price is likely headed in the future. The US Coin Values Advisor website has historical information that can be accessed for various types of coins. Additionally, PCGS, the leading third party grading company, has created their own index, which is referred to as the 3000 Coin Index. This index tracks the performance of the rare coin market relative to other investment options. Lastly, consider obtaining past copies of the coin dealer newsletter or Redbook. Keep in mind that the estimated value of coins by third party grading companies isn’t necessarily consistent with market prices.
Should You Invest in Certified Rare Coins?
While we’re typically not a proponent of having gold and silver bullion coins professionally graded, as coins that come directly from the U.S. Mint should be in uncirculated condition; we believe that there is some value to having rare or numismatic coins certified. The reason is three-fold. Firstly, having a sonically sealed hard acrylic plastic case helps to preserve the coin so that it isn’t damaged from handling. Secondly, the process of having a coin certified also means that it’s authenticated by a third party grading service, so this eliminates any question as to if you have an authentic coin in your possession. Thirdly, having a professionally graded coin helps to avoid any disagreement between two parties over the condition of the coin.
In summary, you should take note of why you’re purchasing numismatic coins before doing so. If merely for the love of the hobby and as a keepsake, most of the above guidelines don’t apply. However, if the primary reason is as an investment, you should approach it as a long term investment and realize that there will be ups and downs in the market. Take some time to research the historical price of the coin that you’re interested in and consider acquiring a certified coin for the reasons outlined above.
