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Investing in Rare Coins

Show Me the Money! A Closer Look at Investing in Rare Coins

Editor’s Note: This article was first published in Jan. 2014. It was updated in Sept. 2017

Investing in Rare Coins is a More than a Hobby

Having collectibles as an investment can be a great way to diversify your portfolio and cut down on risk. The general rule of thumb? Invest in what you love when it comes to collectibles. If your collection doesn’t realize a return, you still get to enjoy what you’ve gathered. So, are you an investor or a collector?

“This is a huge issue in the rare-coin community,” said Timothy O’Fallon, senior numismatist with Gibraltar Coins told CNBC. “In my opinion, we’re at the genesis of a new way of looking at rare coins—from an investment perspective instead of a collecting perspective.” 

Invest in what you love when it comes to collectibles

Collectibles are fast becoming a popular investment vehicle for those who have lost trust in the public stock markets or are tired of fluctuations. Tangibles allow an investment to appreciate in value over time, which appeals to investors. They are also not necessarily exclusive to the uber-wealthy. However, personal interest in a tangible asset remains the number one reason people choose to invest in their collections. Rare coins are considered to be a commodity-like investment where sentimental value may exist, but coins are one tangible that can also produce attractive financial returns.

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The fact is, uncertainty is ever-present in the public and private markets. This uncertainty, coupled with recession and other economic ups and downs, calls for creative investment strategies. Tangible assets, also known as hard assets, present several options for investors who want to put money towards their personal interests.These may include income producing assets such as timberland, farmland, and commodities of all kind.

Note: There is a distinction between coins as bullion and coins as numismatics. Bullion has a higher ‘melt value’ – the value the metal would be worth if melted down. Numismatic coins, because they are often much older and made of various metals and components, have a lower melt value. They’re worth less when melted then they are in coin form. The general rule is to, “buy bullion for business, numismatics for fun.”

Why is Investing in Rare Coins Still Popular?

People collect rare coins for the same reason people collect art, says Ilya Zlobin, ancient numismatic coin expert, dealer and enthusiast of TrustedCoins.com. “Rare coins, especially of the ancient Greeks and Romans capture the feel and the art of the time period [like] statues and architecture that have long been lost to history.” Also, says Zlobin, there is a very high upside resale potential, should investors make the right buy for the right price.

“…Stories of exponential growth understandably stoke investor interest in the world of collectibles,” according to a 2012 Barclay’s report. However, “Relatively few wealthy individuals own treasure solely for its financial characteristics. Investors that do seek financial returns on insurance from their treasure typically favor commodity-like items, such as precious metals, coins and jewelry.”

Investing in Rare Coins

Once nicknamed “The Hobby of Kings,“ collecting coins has become an everyman’s game thanks to a rise in numismatic scholarship, education, access to information and a growing sophistication of the general public over the last 500 years For the average person, owning coins makes possessing a piece of history remarkably easy to access. For those with a special interest in antiquities, coins are in general more accessible than larger, tangible asset investments.

For beginners, collecting rare coins may seem daunting. Experts and experienced collectors offer this advice:

  • Specialize – Choose a particular emperor, denomination, theme or time period and use it to guide how you invest. Stay focused on a particular concentration and build within that. Financier Louis E. Eliasberg did just that and his collection got him listed among the world’s most famed collectors.
  • Scrutinize – Don’t pick randomly from your choices. Know what you’re looking for and examine coins carefully to make sure they fit within the direction you’re taking your collection.
  • Study – Collectors shouldn’t just take the opinions or advice of sellers. Collectors should become experts themselves, studying up on values, denominations, rarity and other aspects of the area in which they intend to collect. Read trade magazines, talk to other collectors and learn what questions to ask. Study up on some coin collecting lingo here.
  • Start Small – Buying small will allow investors to start collecting without betting the farm. Buying large quantities of coins or high-priced coins should only come with experience. Buying rare coins or coins minted with historically importance is ideal. But amateur or inexperienced collectors should never spend large amounts of money on coins they don’t understand. Collector and numismatics mentor Susan Headley notes, “If you can’t afford to shell out $2,000 [per] coin to buy … high grades, then buy common coins in the finest grades you can.”

    Investing in rare coins is as much an investment as putting money toward any asset class.

Does Your Rare Coin Make the Grade?

It is crucial that all coin investors to know their dealers. Investing in rare coins is as much an investment as putting money toward any asset class: Trust is key. As a purveyor of rare coins, Zlobin notes that the grading scale is subjective:

  • Good (G)
  • Very Good (VG),
  • Fine (F),
  • Very Fine (VF),
  • Extra Fine (EF), and finally,
  • Fleur-De-Coin (FDC), or a perfect mint state.

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The overall appearance of a coin and its appeal to buyers and sellers alike are all highly subjective matters. Grading standards may vary. Well-known houses like Heritage Auctions provide some guidance and the Professional Coin Grading Service, among others, can give a point of reference as well. Keep in mind that very fine distinctions between coins will make a big difference in its worth, even thousands of dollars’ worth of difference for the smallest distinction. Subjectivity is considered one of the risks in rare coin investing.

“With many dealers and collectors, the coin’s state of preservation and aesthetic beauty are of paramount importance. In other words a beautiful coin is more desirable, and also much rarer in that state of preservation,” says Zlobin. “There are other things that are important for ancient numismatic coins, too, such as centering, the artistic beauty of the strike and its sharpness. Ancient coins were struck by hand, so a coin in fantastic preservation that is nicely centered and of an interesting historical character, period or city would have higher value.”

very fine distinctions between coins will make a big difference in its worth, even thousands of dollars’ worth of difference for the smallest distinction

Risky Business?

“Caveat emptor” says Zlobin. “Deal with people that provide a guarantee and a good track record with their coins [and] with people you know and trust. Always ask for the best possible price.”

Any investment has inherent risk, and coin collecting is no different. Are the risks any greater or less than investing anywhere else? Not if you invest in what you love, say collectors. “There are many reputable dealers out there,” says Zlobin “It is a very big advantage to deal with them, as many have knowledge and experience, and know that it’s just good business to sell only authentic coins.”

Always examine coins in person before buying

Federal Trade Commission

However, the Federal Trade Commission has issued warnings to help protect consumers from fraud. False claims about grading, current value and buy back options are the most common ways investors lose money when collecting coins. “Examine coins in person. It’s difficult, if not impossible, to make a practical decision about buying a particular coin based on a photo or a conversation with the seller,” advises the FTC. “Check out any coin dealers in a search engine online. Read about other people’s experiences. Try to communicate offline if possible to clarify any details. In addition, contact your state Attorney General and local consumer protection agency.” And always get a second opinion.

Zlobin’s risk advice to investors is:

  • Always try to get the best possible price – Investing in rare coins doesn’t have to break the bank. Some dealers can give you breaks as the margins are oftentimes sufficient for everyone to be happy.
  • Be detached about the outcome of the deal – Do your best to secure a great deal, but be an investor that can also think as a collector. This way, you win no matter the outcome.
  • Keep records of how much you paid for a coin, and all receipts – This will give you a record of the coin’s grade, and purchase information. Also, if you want to sell these investments and realize a profit, you’ll need to be organized.
  • Work with dealers willing to prove themselves – Some dealers provide a lifetime guarantee of authenticity, and some will issue certificates of authenticity.

Return on Investment

In general, investors can expect rare coins to have an investment horizon similar to most other investments – one that will last for a few months to many years. “I have seen ancient coins sold at one major auction house, to be sold just several months later and for more money at another auction house,” says Zlobin. “Yes, it is possible to make money rather quickly with intimate knowledge of the market [but] the money in ancient numismatic coins is made during the purchase of the item. A good rule of thumb is to always do your research and know that you can at least get what you paid for the coin back. With uncertainties about the valuations of all the global currencies, it is a good idea to hedge your net worth with this being a great avenue for storing wealth. Numismatic coins especially may carry a higher resale value than gold or silver bullion, as they are not as prone to those specific market fluctuations.”

Always do your research and know that you can at least get what you paid for the coin back.

There are professional numismatic reference sites, where investors can trace the price trends of coins going back many years and get an idea of how certain coins will fare on the resale market. Although any investment carries risk, and although almost all dealers of any investment will tell you that “past performance is not an indicator of future results,” investors can make informed decisions about their coins by looking at how the pros have traced them.

Many Others are Investing in Rare Coins, Should You?

As Keith Heddle, managing director with Stanley Gibbons, a renowned U.K.-based rare-stamp auction house and investment advisory firm reported to CNBC in 2015, “The recent world records in auction houses across the world show that this trend isn’t abating; indeed, it’s escalating.”

So, who buys rare coins? For the most part, it’s anyone interested in owning a tangible piece of history. “For ancient numismatic coins specifically, the historical value is very important,” Zlobin says. “For example, a Julius Caesar coin sells in any market in practically any condition. Another well-known name would be Alexander the Great.”

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Coin collecting is an investment almost anyone can make. For serious investors, coins are a tangible asset that will provide diversity in a portfolio and hedge against inflation as the value of rare coins is generally stable. “A lot of people don’t know this, but ancient coins are actually quite abundant,” according to Zlobin. Many famous individuals are known to be avid coin collectors, such as J.P. Morgan, the Hunt brothers, hockey great Wayne Gretzky, Buddy Ebsen (aka “Jed Clampett”), film director Penny Marshall, and actress Nicole Kidman.

Coin collecting is an investment almost anyone can make.

“Coins, especially numismatic coins, are a beautiful asset to have,” says Zlobin. “Think about how tough it would be to fit a huge painting or a statue or another heavy work of art in your pocket, but an ancient coin can be placed in your pocket, yet be worth quite a lot of money. So you can say the reason why coins are so popular is that they are the original form of money and will always have some sort of value, whether intrinsic or numismatic, or both.”

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About Alicia Purdy

Alicia Purdy was born to worship. She is a writer and worship leader ministering at City Harvest Family Church in Albany, N.Y. Her passion is to support and grow the Kingdom of God through the gifts He has given her. She has been given inspiration and passion on the subject of worship and wrote "The…

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