INVESTMENT ADVICE

Is investment right for you and what pitfalls should you look out for? Find out in this special market guide from the Professional Numismatists Guild

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 market guide from the Professional Numismatists Guild

As we collectors know, the study of coins, tokens, medals and paper money provides hours of enjoyment and entertainment, offering educational experiences spanning a variety of subjects from history and geography to chemistry and economics. Many collectors also study rare coins in the hope of making a profit on the sale of their specimens after holding them for a period of time. Some items have shown dramatic increases over the years, rewarding those knowledgeable individuals who have wisely purchased. However, should investment be part of your collecting plans, then there are a few things you should understand and keep in mind.

Is investment 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 shortterm investment. They are to be considered 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.

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, or their state of preservation. Often, their value is highly dependent on their grade and very small differences in quality can translate into very large differences in value. For that reason, several independent services have been established which render an impartial opinion on the grade (and authenticity) 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) which, along with its currency division PMG is the official coin and currency grading service of the Professional Numismatists Guild, and the Professional

Coin Grading Service (PCGS). Other respected firms perform this function as well. Recognised currency grading services are

Paper Money Guaranty (PMG) and PCGS Banknote (separate from the coin service). If you are considering the purchase of rare coins or currency, you may want to buy pieces that have been certified by one of the recognised grading companies.

Watch out for ‘modern rarities’

Many newly minted coins are marketed through advertisements and direct mail pieces as seminumismatic 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. They are sometimes (though not always) minted by small island nations and packaged in special presentation boxes with certificates of authenticity, or some other manner of credibility. The US Mint and other official government mints worldwide also

produce new commemorative coins. These pieces are sometimes touted by marketers as good investments because of their theme or restricted low mintage.

While occasionally some of these do appreciate in value the majority of these modern issues have ended up valued at close to their bullion (melted) value, or below their issue price, leaving the owner with an expensive box and certificate. If you like the subject or theme represented by these coins, admire the beauty of the design, or would like to own them as a souvenir or to show support for their particular cause then buy and enjoy 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. When buying collector coins or currency (or anything else for that matter) be aware of the maxim that has been repeated over and over again through the years: ‘There is no Santa Claus in numismatics!’ 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. But to believe that a dealer will sell you an item for less than its wholesale value is naive to say the least. 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. Plunging in, based on the promises of a telephone salesman who solicited you, is a formula for disaster. On the other hand, 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.

Here are some guidelines to help you select a dealer:

1. Check their reputation. Ask the trade organisations, such as the Professional Numismatists Guild (www.PNGdealers.org). Consult the hobby press. Ask other dealers and collectors. Don’t be simply fooled by fancy brochures and flowery advertising. A few phone calls or emails could be the best insurance you’ve ever purchased.

2. Consider dealer longevity. Examine very carefully any dealer who has been in business for less than five years.

3. Before you agree to buy anything over the telephone, ask yourself if what you are being promised could