Rare Coin Investing

Hardly a day goes by without some reference being made in the media about the benefit of investing in rare coins. This might be encouraged as a hedge on inflation, in preparation for some cataclysmic event, or just general investing. Regardless of the reason, investing in rare coins can be a good idea, and with a little background knowledge, not only can you make money at it, but you can also avoid many of the most common—not to mention most expensive–pitfalls of the field. This article will serve as a primer for helping you avoid the most common errors and, and least hopefully, make some smart deals in process.

1. Remember that there is no such thing as a bargain.
The last time someone told you that if you took a given course of action you would get rich, did you wonder if the advice giver was so smart, why wasn’t he rich? As it usually turned out, it wasn’t good advice. The same is true in the rare coin investment business. Most bargains that sellers are pushing aren’t bargains at all. You should always be careful when someone tries to sell you on a given buy and says that it will appreciate in value more than a given percent. He doesn’t really know or he would be keeping the investment himself. His angle, instead, is to make the sale.

2. Be careful of over grading.
The two biggest problems in the rare coin business are counterfeits and over grading. No reputable dealer would knowingly sell a counterfeit, but a coin that is over graded is a different problem entirely. There are dealers that would purposely over grade a coin in order to exact a higher price. Unfortunately, one of the only ways to defend yourself, besides having the right education and lots of experience, against this problem is to find and depend on a reputable dealer.

3. Be careful of business people instead of coin experts.
There are many people involved in the rare coin business, some excellent business people, and even shrewd negotiators, but not necessarily experts in coins. Fortunately, finding real experts is just a matter of shopping around. Such is the case with Monaco Rare Coins. Not only are they good business people, but they also know coins and the coin business. The number of people in the coin business who are truly knowledgeable about rare coin investing is so small that it’s funny. Before you try to invest in rare coins, try to arm yourself with as much knowledge as you can, and be careful. Ernest Hemingway once said that the best tool of a writer is a “built-in, shock-proof s*** detector.” That’s good advice for coin buyers too. When you sense it, leave it.

4. Auctions are often only good for the auctioneers.
Auctions offer what are often good places to buy and sell rare coins. Unfortunately, they are also excellent places to lose your shirt if you don’t know what you are doing. Proper buying at an auction house is incredibly time consuming and often not worth the effort if you are looking for a “sleeper” in the mix. Auctions are also good places to get caught up in traps, such as when you are competing with someone else for a coin. That other person might not be an astute buying, just running up the price for the wrong reasons.

There are other problems with auctions as well. First auction houses charge between 10 and 20 percent for a commission, driving the final price up. Second, dealer collusion is rampant and openly practiced. Third, it can take several months to get your money from an auction. Some auction houses will advance you money on your sale, but these loans come at a steep rate of interest.

5. Coin value is relative.
The value of coins is constantly changing. It is virtually impossible to put a firm value on a coin. Coins are often listed in a catalog at a certain price, but that only means that is what they are listed for, not necessarily what they are worth. A good way to get a feel for the value of a coin is to make comparisons between a series. Matters such as mintage aren’t always relevant.

6. Beware of pretzel logic.
The old saying of “Buy low, sell high” isn’t necessarily good advice in the rare coin investment business. What was once a good price might not be if you wait, especially if the price goes up. What is low one day might be high the next with a fluctuation in the market. Watch for trends and get good advice before buying or selling.

7. Observe the difference between high-quality and off-quality coins.
There is a distinct difference between buying the best and buying second best. Buy the best you can reasonably afford. Don’t buy lesser quality thinking that it will grow in value, because it probably won’t. With high-quality coins you can be reasonably sure that they will grow in value. You won’t be that lucky with off-quality coins.

8. A coin’s value is best determined by what someone is willing to pay for it.
It’s been said many times about many things, but it’s true. The only valuation worth anything is the amount someone is willing to pay. In the end, that’s all that matters. Anything other than this price is at best an educated guess. This also has the value of teaching you who you can depend on to sell you good coins at reasonable prices.

When all is said and done, the best way to make money from rare coin investing is to buy a correctly graded coin at the right price. This might sound like a given, but it is most frequently easier said than done. When you consider all of the factors mentioned above, the chances are that you will buy something that is a good investment is much greater. Buy from a reputable dealer and sell to a willing buyer. In the long, and more profitable, run, this is the way that will return you the greatest profit.