What You Need to Know Before Investing in Collectible Coins


If you are going to buy collectible coins as an investment, it is important to do some research. A 1794 U.S. “Flowing Hair” Dollar fetched more than $10 million at an auction in 2013, but Collectible coins have historical or aesthetic value for collectors. The value of many collectible coins exceeds their melt value because they contain a small amount of gold, silver or other precious metal. Collectors refer to the value of collectible coins as numismatic value and explain that the value is determined by such factors as the type of coin, the year it was struck, rarity and the condition or “grade.”

Dealers who sell to coin collectors often have valuable coins graded by professional services, such as PCGS, NGC or others. The grader then assigns a numerical rating from one to 70 and places it on a plastic cover for protection. However, factors such as “general appearance” and “visual appeal” are subjective, and the rating assigned to a particular piece may vary among coin dealers.

On the other hand, the subtle distinctions between coins can mean big differences in the value or price of a coin. A small variance in grade can mean the loss or gain of thousands of dollars in value. Subjectivity in the ranking means that there is inherent risk even in investment pieces.

Expect to keep your investment for at least five or ten years before you finally make a profit. This is because dealers often sell collectibles at a markup. This is how they make their money. Also, the market for numismatic coins may not be the same as that of precious metals or gold bullion. It is possible that the price of gold can rise while the value of a gold numismatic coin drops. Some investors are also interested in a gold IRA or silver IRA for retirement and it is important to note that bullion coins can be held in an individual retirement account, the Internal Revenue Service (IRS) does not allow IRA funds to be invested in collectibles.

Investigate before investing

If you are thinking of investing in collectible coins, take your time and get to know the subject.

• Request the melt value – the basis of the intrinsic value of the coin if it is melted and sold. The melting value for virtually all bullion coins and collectible coins is widely available, but understand that the melt value may bear little relation to the value of a collectible coin is scarcity, condition and other factors of interest to collectors are met. “Often times precious metals products will be discussed in terms of their relationship to spot,” explains Anthony Allen Anderson, VP of Sales and Marketing at GSI Exchange in Calabasas, California, “for example, a buyer might get a quote of “$20 over spot” to buy a gold bar, so it is important to remember all precious metals products have two components to their value: The spot price (or “melt” value) and the premium and those premiums range from as low as a percent or two, all the way up to millions of dollars per ounce for the rarest coins!”

• Read magazines to check the value of collectible coins and follow trends. Keep in mind that collectible coins are sold at a premium so that the dealer can make a profit. You can find updated lists of wholesale value in magazines and online.

• Be clear about the commission or commissions being charged by the agent or intermediary. For example, at auction the buyer’s premium may exceed 20% of the auction sales price.

• Examine the coins in person. It’s hard, if not impossible, to make a practical decision about buying a particular collectible coin from a photo or conversation with the seller.

• Ask about grading. If the coin has been professionally graded and authenticated check the grading service. Is it independent of the distributor? What is the reputation of the grading service in the industry? Two services used by professional coin dealers include The Professional Coin Grading Services (PCGS) and the Numismatic Guaranty Corporation (NGC). If you believe that a coin is falsely or fraudulently graded or placed in a protective case to which it was not originally associated, check the serial number in the case of the coin or classification document. Most legitimate grade assign a serial number for each coin are sorted so buyers can independently verify the note. You can check the serial number online or by phone.

• Obtain a second opinion about the value and authenticity.

• Obtain a written copy of the return policy. Many reputable coin dealers offer a return period if you are not satisfied with your purchase. Fourteen days is typical.

• Ask about return, exchange and refund policies as they vary among distributors. Some may offer to redeem your coin if the condition is unchanged since when you made the purchase. Others will buy your coin back but charge a commission. And others may only offer store credit.

• Consider the tax implications. The Internal Revenue Service classes some gold products as collectibles. Revenues from the sale of collectible coins may be taxed at a higher rate than other investments. Visit irs.gov or check with a certified public accountant for more information.

Potential Pitfalls When Investing in Collectible Coins

Misrepresentation – Unscrupulous sellers of collectible coins may grade their coins internally or use a less reputable grading service. Others create counterfeit presentation documents or place poor quality pieces in top labeled cases.

False Claims About Present Value – Some dealers grade their currencies accurately, but overprice them or deceive customers about their value.

False Claims on Repurchase Options – Many dealers offer buyers exchange options that give them a sense of security in their investment. The dishonest sellers do not honor the option or do not disclose the fees and other expenses attached to the option.

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