Why Coins?

Since the beginning of recorded history 6,000 years ago coins, particularly those minted from gold and silver, have served as storehouses of financial value. Collecting specific coins (as opposed to just accumulating masses of coins) is a more modern phenomenon, dating back over five centuries. As collectors discovered that some coins were harder to find than others, the concept of “rare coins” arose. The law of supply and demand created a premium for these coins above their face value or the value of the precious metals they contained. In our lifetime and those of our parents and grandparents, gold and silver have held their value while other forms of money have lost most of their purchasing power. Rare and historic coins have often outperformed even common gold and silver bullion during rising cycles.

Coins Hold Value.

Every investment involves risk. Even cash in an FDIC-insured bank account is subject to the erosion of inflation. And even Fortune 500 companies such as Enron, WorldCom, Delphi, and four of the six legacy US airlines go bankrupt, leaving their stock and frequently their bonds virtually worthless. Short of bankruptcy, companies can and do issue additional shares of stock, diluting the shares already held by investors. Governments print money and inject it into the economy, diluting the value of cash; over the past three years the US dollar has dropped about 25% in value relative to a basket of other currencies, and about 60% relative to gold. Even many non-paper assets, such as mass produced collectibles are well, mass-produced. When the crazes ended for Cabbage Patch Kids and Pokemon figures, their essentially infinite supply tended to devalue them precipitously. Some investors seeking to balance their portfolios with an asset class not subject to these types of risk are purchasing rare coins. Rare coins are totally immune from bankruptcy and close to immune from dilution. The US Mint will never manufacture another 1913 Liberty Head Nickel. And decades of enormous premiums have pulled almost all rare coins not held in collections into the marketplace. Even when a shipwreck or hoard is discovered, marketing based on the excitement reaches beyond the numismatic community to the public. That has increased the number of serious collectors and investors, so that over the years demand has grown at a greater rate than supply.

Why it is safe to buy rare coins.

Rare coins tend to appreciate, particularly in inflationary periods, and collectors and their heirs have realized fortunes on the sale of coins that had been held for decades. Until 20 years ago, however, investing in rare coins would have been a dicey proposition for most people. Investors who were not experienced numismatists would have had a difficult time distinguishing between authentic and counterfeit coins and between valuable specimens of a particular issue and coins that has been cleaned and polished to resemble them. Even among genuine, unaltered coins, they would have been unable to detect the fine distinctions that separate one grade from another – distinctions that can yield price differentials of hundreds, thousands, and even tens of thousands of dollars. Investors would have had to rely entirely on the expertise and integrity of their coin professionals. The advent of third-party coin grading services in 1986 opened the way to safe investing in coins by non-numismatists. The grading services encapsulate the coins in tamper-evident transparent holders, known among numismatists as “slabs.” Also encapsulated in each slab is a certificate of authenticity and a grade, such as “MS65,” which means that on a scale of 1-70, with 70 meaning a perfectly minted and preserved coin, the coin rates a grade of 65. (“MS” stands for “Mint State” and designates the upper end of the grading scale, from 60 to 70.) Rare coins could now be bought and sold like shares of stock. One authenticated 1911 $5 U.S. Gold Indian graded MS65 by one of the respected grading services, such as NGC or PCGS, is considered to be the same as any other (although the most finicky collectors and investors hunt in person for “high-end” specimens within a grade). Every day thousands of rare coins are bought and sold “sight-unseen” through Internet auctions sites and television shopping channels. (“Sight-unseen” is the industry term for these sales; in fact retail Internet auction sites show photos of the coins, and TV shoppers see them displayed on their screens.)