By Ken Smaltz
Imagine that you came upon a pouch of coins minted in Damascus during the Roman Empire more than 2,000 years ago.
You might hop on the Internet, daydreaming about the fortune to be made off of money so incredibly ancient.
Much to your chagrin, the coins prove to be worth a mere $10 a piece. And even more shocking still, you read about a $20 St. Gaudens coin produced as recently as 1933 that sold for $7.6 million in 2002.
This hypothetical story represents a predicament many new coin collectors and investors discover. Age alone does not make a coin valuable. Rather, rarity coupled with interest and condition of a coin may offer a larger determining factor in its marketability.
For any newbie to the coin world, the key lies in understanding the basics.
There are two different types of people who amass coins: collectors and investors.
Collectors do it for the love of the coins themselves. Collectors might be interested in the historical importance of a coin or the fact that they can complete a historically significant series. For instance, a collector’s goal might be to assemble a series of Civil War coins.
The investors, on the other hand, collect to make money. They tend to be interested in rarity and appreciation.
Like investing in stocks or real estate, investing in coins comes with a lot of jargon. For example, how many people in your office know that bullion is the term for silver or gold in bulk before coining? Luckily, the language of coins does not involve any kind of legalese and is arguably easier to understand than the documents you signed when closing on your home. If you understand option trading, or puts and calls, or real estate terminology (or even if you don’t), you can understand coins.
Coins are no different than investing in other more traditional instruments. If purchased properly and prudently, they will pay off.
One rule of thumb is to look for rarity. Just like art or antiques, if a coin is common now, it will be common later. But if a coin is rare now, it will be even rarer later.
Experienced investors will recommend looking for coins with “key dates.” Key date coins are comparable to blue chip stocks in that they are generally seen as safe investments. These are coins that are noted for the date of their minting – not necessarily because they are the oldest coins around but because they are among the rarest. These coins are like IBM stock is (or was anyway). If you buy a key date coin, down the road there is a very strong chance that it will be worth more than what you paid for it. Of course, all investments are subject to fluctuations but if you look at a graph of a key date coin’s value, even with the peaks and valleys, the overall progression of its worth will show an upward trend.
Beyond knowing key dates, potential investors should be aware of sources that take the guesswork out of purchasing coins. One resource is the monthly special edition of “Coin World” magazine, which features a “Coin Values” segment. “Coin Values” includes the value of all U.S. coins on the market given their various grades or conditions. The listing offers average retail price, which is gathered using data from online purchases, auctions and coin shows. The rate listed for an individual coin reflects the closest price that the buyer should pay for that coin. Buyers want to purchase within 20 percent of the price listed in “Coin Values.”
There is also a “Coin Values” featured online where a collector or investor may instantly look up a coin’s value.
Once a buyer knows what to look for, purchasing coins can be just as basic as anything else.