When it comes to investing in coins, regardless of being precious metal or just plain hard to find, the investors needs to be able to separate from collecting coins because they are rare and unique versus obtaining coins because they will produce a good monetary return later on when sold. Unfortunately, the line often gets blurred by emotion as well as faulty assumptions about how the rare coin market works. Beginning buyers who don’t learn these lessons quickly can often find themselves quickly separated from their money and stuck with dud coins. That said, if a person just wants to be collector that’s fine; it doesn’t work well, however, for an investor who needs to make a profit.
Bargains are a Myth
The rare coin market is frequently one of three types of deals: 1) dealer to person, 2) dealer to dealer, or 3) person to person. As a result, there’s rarely a situation where a given Saturday is a blue light special or a holiday sale. While many folks will talk about bargains and winning a big sale on a great find, those usually only happened in accidental estate sale. In most cases, buyers and sellers are quite aware of what they have with a coin, or they think they know. As a result, no one is going to let go of a plausible rare coin for a song. At best, most sales will be fair market sales. At worse, a coin price will be inflated far beyond what it’s worth.
Coin shows are the most common places where coin “bargains” are pitched and marketed. Instead, anyone actually buying a coin more often is paying a premium on the coin that helps pay the dealers markup, transportation costs, table fees, business expenses, and taxes. So, no surprise, the margin of increase on a coin sold by a show dealer is going to be considerable. It’s more than a break-even issue; it’s a necessity for those who make a living selling coins.
Watch Out for Private Grading
Grading is often used as the barometer that almost all buyers use in determining if a coin is purchasing material or not. While there is a general understanding across the market of how grading works, and what each level of grading means, that doesn’t mean everyone follows the same standards applied to grading a coin. Most professional and licensed dealers are not going to participate in outright fraud. Their business depends on their reputation and customers coming back again and again for more purchases. So if word gets out that a dealer is selling bad coins, he’s going to be shunned by just about everyone except completely ignorant rookies. Hopefully, such a dealer will have gone out of business first.
Over grading, however, is another problem entirely. In this kind of scenario, a coin is simply sold or marketed one grade higher than it is. Doing doesn’t produce a significant rip-off, but it can produce a steady, unearned profit. A number of dealers will go into this shady area, particularly pushing over graded coins on new investors and collectors alike.
The major defense to this approach is to only purchase coins that are independently graded and slabbed. At least that way the quality of the coin is not in question. The discussion can then simply focus on the price and whether it’s worth that grade. However, many coins are sold unslabbed and instead with private packing and labeling. That leaves it to anyone’s opinion what grade a coin actually is.
Another quick defense is to compare multiple versions of the same coin type. Going with the coin that has the greatest detail and the least amount of scratches and marks will likely be the closest to its grading value, especially when they are all marked close to the same.
The Auctioneer Wins the Most in Auctions
Remember what was just discussed about bargains above? They don’t exist very often. The same principle applies in auctions, including online bidding. However, people still think they can hunt auctions and find that big prize at a great price. It rarely happens. Instead, everybody in the room has a generally good idea what a coin is worth, and will bid it up to at least the market value. Then, at the last minute, there’s usually an emotional flurry of bidding, and the coin eventually sells for a profit. The only party that is ensured to make a clean profit on the whole deal with every sale every time is the auctioneer collecting the auction fees.
Focus on High Quality
The treasure hunter in coin investors is an addictive pest. People like to think if they go a bit into the fringes, they will find a rare coin that someone missed. It’s a myth. There are simply too many collectors, buyers, dealers and investors sweeping through everything. A person is better off taking a metal detector across British farm fields to find rare coins someone missed (honest, it does seem to happen far more frequently than people think).
For the investor, focusing on high quality coins is a far better path to take. Consistently, high quality coins will retain their value and will more often than not rise in worth than offbeat coins. Even if just buying low cost coins, focus on only buying the very best of each coin type. Eventually, those will return the effort with that small but consistent profit margin. It builds up over time.
Investing Ultimately Means Selling
Remember, collecting coins involves finding rare items and keeping them. Investing means ultimately selling those coins for a profit and liquidating them. Folks get these two principles confused a lot, having a tough time letting go of their collections once they build up. A smart investor puts aside personal emotions and coldly evaluates coins, times their value for the best reasonable profit possible, and lets go, selling them where possible.
There is no imaginary profit in this game. Without actually selling the coins, technically every purchase is then a loss. The money used to buy them doesn’t come back. So if truly devoted to being a rare coin investor, be ready to be disappointed letting good things go, a lot.
Rare coin investing doesn’t have to be blind affair. There are number of free resources available to educate one’s self with, especially on the Internet. MonacoRareCoins.com is one option to utilize regularly as well as a number of others. The more one reads and absorbs at Monaco and other sites, the more tools he will have later to make good purchases and good investments.