How to Invest in Rare Coins

8/16/2019 How to Invest in Rare Coins

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HOW TO INVEST IN RARE COINS:

8 Things

You Needto Know toMaximize Your

Returns



A coin collection can be not only an interesting

diversification in a well-balanced portfolio, but also a

vehicle for wealth building. While collectors possess an

unquenchable desire to carefully collect and study their coins,

those who are armed the best with knowledge stand to benefitthe most.

Since the turn of the 21st century, the rare coin marketplace

has changed substantially, providing collectors with plenty of

opportunities to hone their knowledge.

The Internet is responsible for the biggest change because

it has made coins easier to acquire, sell and study. With the

rise of this new marketplace and all the additional access to

information, the study of coins as an investment is as importantas ever.

On top of that, recent improvements in coin grading and

authentication by services like Professional Coin Grading

Service and Numismatic Guaranty Corp. have cleared the way

for enhanced consistency in the marketplace in an era when

counterfeiters are improving their craft. The major gradingservices are quite skilled in identifying the new counterfeit

coins entering the marketplace from China and elsewhere, and

they strive for consistent grading.

All the information the Internet makes available about

coins and their values can be overwhelming, and one cannot

become an expert at spotting counterfeits overnight. But

when preparation is combined with an exacting eye and an

awareness of what is happening in the market, significantinvestment opportunities can become a reality.

COIN WORLD EXCLUSIVE:

HOW TOINVEST IN

RARE COINS



For generations, successful investing in coins has, like in

the case of John Jay Pittman Jr., been synonymous with putting

together a well-thought-out collection. Many of the greatest

collections sold are the result of systematic purchasing over

a long period of time, characterized by strong relations with

dealers, and a willingness to take advantage of buying

opportunities when they present themselves.Pittman, while financially comfortable, never had substantial

wealth. Yet—over the course of decades of careful collecting—

he was able to build a collection that was auctioned in 1997 for

more than $30 million.

David W. Akers, who sold Pittman’s collection, said it best,

writing: “John was not a wealthy man, except in knowledge.”

With his budget, Pittman purchased rare coins in the best

condition he could afford. He took advantage of buyingopportunities when they appeared, like when he traveled in

1954 to Cairo, Egypt, to attend the auctions of the grand coin

collection of King Farouk of Egypt.

Pittman’s Proof 1833 Capped Head gold $5 half eagle realized

$467,500 at the Pittman auction in 1997. Pittman had purchased

it from the Farouk auction in 1954 for just $635. In January

2005 the same coin—now certified Proof 67—sold for $977,500.

While the acquisition price of $635 was a substantial amount ofmoney in 1954, Pittman’s willingness to buy the best he could

afford and to “stretch” when acquiring truly rare coins reaped

substantial dividends for his heirs.

So while the rare coin marketplace has shifted in the 21st

century because technology makes collecting easier and

research more accessible, it is still up to the collector to become

the expert. The following are some of the key understandings

necessary to master the expertise of collecting as aninvestment.



The Internet has been a game-changer for coin collecting.

As collectors and investors have become more comfortable

using the web to evaluate coin purchases, the buying process

has changed.Auctions have gained prominence as collectors are now

more at ease bidding online, and online storage and digital

photography has greatly improved the presentation of coins

online. The offerings of non-U.S.-based auction houses—once

nearly inaccessible to most collectors in the United States—are

now easy to find online.

The end result: Collectors have more options than ever

before for buying coins.The Internet has also allowed better research into coin pricing

as searching auction records online is now very easy. Auction

houses reveal their final selling prices online—often illustrated—

allowing would-be bidders to get a better understanding of a

coin’s price history and place better-informed bids.The information revolution has been a boon to coin buyers.

It’s a little more complicated for coin sellers.

The increased availability and transparency of coins’

purchase histories has forced many dealers to lower their

profit margins. On top of that, easy-to-place online bidding

has reduced the need for dealer representation of clients at

auctions over the past decade.

The web’s benefits for coin buyers, however, should notdiminish the value of face-to-face interaction with dealers.

1. Embrace the Internet



Though the web is an amazing tool for collectors, loss of dealer

representation can be to a buyer’s detriment. Building a good

working relationship with a dealer is a key component in

putting together a great collection.

While many collectors mistakenly think that all coins

are offered at auction, the truth is that many more salesare transacted privately, and a good relationship with a

knowledgeable dealer can provide a coin buyer access

to further acquisition opportunities and valuable “inside

information” on the coins offered at auction.

In an era of collectors connecting with coins and one another

online, the role of the coin show has also shifted as more

national-level coin shows have emerged.

The largest shows include the Florida United Numismatistsconvention in January and the summer American Numismatic

Association World’s Fair of Money, which traditionally rotates

among several cities (though in 2011 and from 2013 to 2015 was

located in the Chicago area).

The Central States Numismatic Society also hosts a major

convention in the spring.

One can add to the list of major shows the three-times-annual Long Beach Coin, Stamp & Collectibles Expo in

California, the three Whitman Coin and Collectibles Expos

each year in Baltimore, and a smaller ANA convention in

the spring. These shows are held in addition to regional and

local shows taking place across the country each weekend.

Collectors and dealers have never had more options in

selecting among major coin shows.

Also on hand at major coin shows are major grading services,which play a key role in upping the value of your collection.

2. Dealers and shows continue to be criticalresources for coin investment opportunities



Are your coins certified?

Just about every investment quality coin out there today is

certified and encapsulated (or “slabbed”) by one of several major

grading services. Those slabbed by Professional Coin Grading

Service and Numismatic Guaranty Corp. enjoy the most liquidity,

but coins certified by ANACS and Independent Coin Grading are

also very marketable. All four services employ consistent grading

and excellent counterfeit detection.

For collectors and investors, having coins certified provides

several advantages, the most notable of which is the grading

guarantee that the services offer. Grading services guarantee

the grade and authenticity of the coins that they certify. If a buyer

believes that he or she purchased an overgraded, misattributed

or counterfeit certified coin, a coin buyer can send the coin back

to the grading service in the original slab for re-examination. Thegrading service will work out a remedy in the rare event that a

mistake was made.

Not covered by grading services’ guarantees, which can be

found at the services’ websites, are clerical or “mechanical” errors,

including dates on holders that don’t match the date on the coin

and other obviously incorrect designations. The term “mechanical

errors” extends to obviously incorrect variety attributions and

clearly misidentified coins. Coins in holders exhibiting tamperinggenerally do not qualify for grading service guarantees.

Changes in a coin’s numismatic status are also not covered. For

example, some numismatists believe that 1856 Flying Eagle cents

are Proofs and others consider them circulation strikes. If futureresearch indicates that all 1856 Flying Eagle cents are indeed

Proofs, the grading service guarantee would not cover resulting

value changes.

For copper coins, each service has different standards for

guaranteeing color, since the color and surfaces of copper coins

can change after grading, because of environmental factors.

So once a collector gets a coin certified, its value is locked in and

not up for questioning, right?Not exactly.

3. Get certified



4. Value is variableCoins certified by different grading services—PCGS,

NGC, ANACS, etc.—often trade at different values, the

result of both perceived and actual differences in the

grading standards used by the grading services.

Why would a coin graded by PCGS trade for more or

less than a comparable coin graded by NGC?

In some specific series and even in grades within a

series, the market has expressed a preference for one

grading service over the other. That can be seen in higher

prices realized in auctions when coins graded by both

services are offered in the same sale.

When purchasing a coin—especially an expensive

one—you owe it to yourself to look into the many different

pricing resources accessible online. Auction results from

the major coin auction houses are easily found online, sobe sure to check them out and track how much the coin

you’re targeting is selling for in the market.

Because auctions bring together a willing buyer and

willing seller in a transparent public forum, auction

prices can provide the clearest indication of fair market

value. The prices achieved at public auction are good

comparables that you can use—along with a dose of

common sense and a dash of caution—when figuring outwhat a coin is worth and how much you should pay for it.



While there is surely more consistency in the

marketplace today than in 1986 when PCGS was founded,

grading is still an art and not a science. That means the

same coin submitted to different grading services at

different points in time may be returned with different

grades, depending on the grader who examined the coin,

and shifting grading standards over time.

With standards changing over time, some coins

may trade for more than expected because the buyer

believes that the coin may upgrade. For example, About

Uncirculated 58 coins are often purchased by collectors

who intend to resubmit them to the grading services in

hopes of getting a Mint State 61 or MS-62 grade.

The difference in price between grades can often be

substantial, making the “crack out” game potentially

profitable for those confident in their grading skills and

having a decent appetite for risk.

Some of the coin types most frequently resubmitted for

grading include:

• Small-sized gold coins, including gold dollars and

gold quarter eagles

• Indian Head $2.50 quarter eagles and $5 half eagles

• Beautifully toned coins

• Rare dates

• Lightly cleaned coins

Enough to think about? If your head isn’t already

spinning, consider that even within a specific grade,

coins can be rated below-average, average and above-

average. To reflect those next-level ratings, several newoptions have emerged in the last few years.



5. Go between thegrades

Even within one grade, some coins are nicer than others, and

the market has struggled to come up with a way to meaningfullyand consistently identify these “PQ”—premium quality—coins.

Some credit the “stickering” phenomenon to Rick Snow, who

introduced his Eagle Eye Photo Seal in 1996. Later, NGC began

to identify especially nice coins through the use of its Star

designation. A star on the grading insert on the slab signifies that

a coin has exceptional eye appeal for a given grade.

“To receive a star, coins must be free of any obvious planchet

irregularities, and display no bothersome spots or blemishes,” NGC

explains. “Toned coins can be of a single color or multicolored but

cannot have any areas that are dark brown, approaching black.”

The coin market responded positively to the NGC Star

designation, but by and large, the stars identified coins that

were already selling for premiums in the market because of their

superior eye appeal.

For years, a gap existed in identifying coins that were simply

solid for the grade. Certified Acceptance Corp. began accepting

submissions of PCGS- and NGC-certified coins in 2007. The

company is not a grading service in a traditional sense, but

instead, applies a CAC sticker that signifies that the coin meets

CAC standards for a given grade. The marketplace has come to

accept CAC sticker—the green “solid-for-the-grade” sticker and

gold “candidate-for-an-upgrade” sticker—as a signifier of a coin

that is premium quality.

Observing collectors’ and dealers’ positive reception of

CAC-stickered coins led PCGS and NGC to announce on



March 25, 2010, that they were introducing Plus designations to

formally signify that a coin is high end for the grade. PCGS also

announced that day its new PCGS Secure Plus system, which

digitally captures a unique “fingerprint” of each coin and enters

it into a permanent database where the system can detect when

the same coin is resubmitted.

PCGS President Don Willis stated, “The process can help

detect if a previously registered coin has been artificially toned,

dipped or processed in some other way in an effort to get a

higher grade.”

NGC continues to use both the Plus and the Star designation,

and while the coin market has accepted that coins with stars, CAC

stickers and plus signs are worth more, the degrees of increase in

value for each are still being defined. Especially for Plus designated

coins, the number of coins evaluated for this designation is small inproportion to the total number of coins on the market.

The absence of a CAC sticker, a plus sign or an NGC star does

not mean that a coin is not superior quality—it could mean only

that the coin has not been evaluated for the added designation.

In recent years other services have entered the marketplace

to sticker certified coins that are nice for their grades. These

include WINGS, which reviews world coins, tokens and medals

to determine if they are premium quality (WINGS gold sticker)or solid for the grade (WINGS silver sticker). Quality Assurance

Company places a QA Check sticker to verify solid quality

PCGS- or NGC-graded modern-era U.S. coins. Additionally,

MACge identifies 17 copyrighted Grade Enhancement

categories on certified and encapsulated modern coins, such as

a Full Split Thumb designation on Walking Liberty half dollars.

A sticker or Plus designation solidifies a grade that a service

determines. On the other end of the spectrum, it’s possible for a

determined grade to be faulty, and you need to be aware of how.



6. Look out for“doctored” coins

“Coin doctoring is the action of a person, or the enabling of another, to alter

a coin’s surface or appearance, usually to diminish or conceal defects, andthereby represent the condition or value of a coin as being superior to its

actual condition or value,” the Professional Numismatists Guild said in 2010.

The PNG definition listed some of the processes that would be

considered “coin doctoring,” including:

• Effacing hairlines by polishing or manipulating the surfaces of Proof

coins.

• Applying substances to the surface of coins to hide marks and

defects.

• Hiding marks or otherwise changing the appearance of a

coin by adding toning.

• Adding chemicals or otherwise manipulating the surfaces to create

cameo frost on the devices of Proof coins.

• Making a coin appear more fully struck by re-engraving portions of

the devices, such as re-engraving bands on the reverse of a Winged

Liberty Head dime or adding head detail to a Standing Liberty

quarter dollar.

• Altering dates or Mint marks or other struck portions of a coin to make

it appear to be from a Mint, date or type other than that of origin.

• Altering circulation-strike coins to make them resemble Proof issues.

“This definition is not intended to be all-inclusive, but only illustrative

of forms of coin doctoring,” PNG says.

Perhaps the definition was too specific, because on Jan. 5, 2011, at theFUN convention in Tampa, the PNG membership voted 45 to 2 to remove



the expanded definition. The PNG determined that a sentence in the

membership code requiring members “to refrain from knowingly

dealing in counterfeit, altered, repaired or ‘doctored’ numismatic items

without fully disclosing their status to my customers” is sufficient.

Unfortunately, coin “doctoring” is a dark area of the rare coin market

that defies easy categorization and definition.

The problem of “doctored coins” came to the forefront on May 13,

2010, when Collectors Universe Inc., the parent company of PCGS,

filed a lawsuit in a federal district court accusing several coin dealers

of various illegal acts related to allegedly submitting “doctored” coins

to PCGS for grading on multiple occasions over a period of years.

Both PCGS and NGC have stated in their dealer agreements that

dealers will not knowingly submit coins that have been doctored and

the PCGS lawsuit sought to establish coin “doctoring” as a federal

crime.

The lawsuit brought up a key problem with “doctored” coins: they

change over time in the holders. While the coins may defy detection

at first, over time the chemicals applied to the coins’ surfaces create

notable changes in the appearance, revealing their “doctored” nature.

While that lawsuit was dismissed on Dec. 13, 2010, it brought the

issue of coin “doctoring” into the open as never before, and both PCGS

and NGC have responded with improved detection techniques aimedat helping detect “doctored” coins and fakes. The guarantees offered

by the grading services provide an extra layer of protection.

Even with those protections now in place, the best protection against

buying “doctored” coins is educating oneself on how coins age over

time and what genuine coins look like, and working with trusted dealers

who can guide potential investors toward high-quality coins that appear

to have original surfaces.

“Doctored” coins can do you in if you’re not careful. But so can thefinest of certified, authentic coins.



Another development of the past decade has been the

increasing popularity of collecting by PCGS and NGC registry

sets. These programs allow collectors to record the certified

coins in their collections and compete with other collectors,primarily for “bragging rights” of having the finest collection.

Participating in the registry programs is free and provides

collectors with a sense of community. But, perhaps the

programs’ main success for the grading service is in placing

pressure at the very top end of the market, especially for

modern coins.

For example, a coin may be common in Proof 69 Deep

Cameo yet be prohibitively rare in Proof 70 Deep Cameo. InJanuary 2004, Heritage Auctions sold a PCGS Proof 70 Deep

Cameo 1969-S Lincoln cent for $40,250. In contrast, PCGS Proof

69 Deep Cameo Lincoln cents can be readily found for under

$500, such as one that sold at a Jan. 11, 2015, Heritage auction

for $493.50.Later, that Proof 70 Deep Cameo cent developed several

small spots and PCGS bought it back under its grading

guarantee, as it no longer graded Proof 70.

Even the grading services are beginning to advise collectors

to be cautious when purchasing low-population common

coins for stratospheric prices. Mark Salzberg, NGC’s chairman,

warned collectors at the FUN convention on Jan. 8, 2011, that he

saw what may be a speculative price bubble forming for suchcoins.

7. Beware price bubbles



He cited the example of a 1944 Walking Liberty half dollar

graded MS-68 by PCGS that realized $109,250 at an Aug. 10,

2010, Heritage auction. MS-67 examples were routinely trading

at the time at the $1,000 to $1,500 level and at a February 2015

Heritage auction a PCGS MS-67 example with light toning sold

for a reasonable $1,292.50.

His message was that while some coins are truly rare,

many extremely high prices achieved in the marketplace for

otherwise common 20th century coins of exceptionally high

grade may not be fully justified from a value perspective.

When looking at coins for investment purposes, look at rarity

both in an absolute sense and a relative sense. Questions to

ask when evaluating a coin for investment purposes include:

• Is a coin rare because there are few known of the issue ortype, or is a coin rare because it is the finest known?

• Is this the type of coin that has historically been valued by

collectors?

• Is this the type of coin that future generations of collectors

would likely covet?

• Is this price justified from a value perspective and is there

room for appreciation in the figure?Going through this exercise will help a potential buyer

identify the marketplace for a given coin in the future, because

for coins to be held as an investment, one hopes for price

appreciation, which is only possible if demand is sustained for

a given coin.

Investing is about getting a great return on your rare coin

collection, but if you don’t pull yourself away from the cold,

hard facts once in awhile and see the big picture, you won’t beas successful.



8. Listen to the timeless adviceof Q. David Bowers

Legendary numismatic figure and Coin

World columnist Q. David Bowers is by

far the most prolific author of numismatic

books. He co-founded the major auction

house Stack’s Bowers, began dealing in

coins as a teenager in the early 1950s,

has sold just about every major rare U.S.

coin that exists, and has been writing on

the numismatic hobby since the 1950s.

He wrote the “Coins as Investments”

chapter in the Millennium Edition of the

Coin World Almanac. In it, he provides

sage advice in suggesting one have a “holistic” relationship with numismatics. On a

“holistic” relationship, Bowers wrote:

“By this I mean that the whole is worth more than the sum of the parts. A modest

amount of time spent reading and studying coins, plus some intelligent buying, will

not only reward you with a nice coin collection but should, over a period of time, give

you much collecting enjoyment and the possibility for really super investment.”Bowers suggests that time spent in understanding grading, chatting with other

collectors about good dealers, and generally becoming a knowledgeable collector

will enable far greater returns on an investment in rare coins. His advice holds as true

in 2015 as it did in 2000.

Ultimately, the best coin investments are made when investors are engaged with their

coins, when they take a connoisseur’s approach to collecting and arm themselves with

knowledge about the coins they collect, build relationships with the dealers who make

the markets move, and develop a love of numismatics beyond simply the pursuit ofgood investment returns.



So in conclusion …Being a successful coin investor requires a number of tools.

You need to be able to value coins beyond their sticker price and develop a keen eye for doctored coins, while

also understanding how a coin gets its grade, how grading services can differ, and how available certain coins are

at certain grades.

It is critical that an investor be both web-savvy and able to develop quality personal connections with dealers

who have knowledge and experience the investor might lack.

Quite the toolbox, right?

Luckily, there is one place where you can find expert content that will help you hone all of these skills—Coin World.

Grow your knowledge with the best in numismatic news and information. Established in 1960 and a

leader ever since, Coin World offers a variety of means to holistically grow your knowledge and

understanding of the hobby.

Whether you prefer to consume our unrivaled content online or in a traditional

print format, we have you covered:

• Our renowned weekly and monthly

Coin World magazines available in both print

and digital formats.

• CoinWorld.com, home to over 5,000 free

coin articles and updated daily.

• Our free email newsletter, which delivers

personalized numismatic news and

valuation information directly to your

inbox.

• Our engaging and informative

Facebook and Twitter pages.

• A community of thousands of

collectors who share your passion

and interests.

http://www.coinworld.com/contact-us/subscribe.html



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How to Invest in Rare Coins