Coin collecting: tips for making money on the sale and trade of rare coins

My mother scowled at me. Now that I’m a father, I don’t blame her. It was 1981, and there I was, sitting at the kitchen table surrounded by $50 worth of pennies. I had unrolled them, searched them for treasures, and lovingly re-rolled them, using all of her scotch tape in the process. And when I didn’t find the 1972 double-die penny that the magazine ad said was worth hundreds of dollars, I tried to send her back to the bank for more. She didn’t go.

The dream of finding that treasure, that rare coin worth hundreds or thousands, is one that millions of people share. The pursuit of a complete collection, filling in that last blank in the little blue book, is a joy that coin collectors have pursued possibly for as long as there have been coins. And the prices of coins, it seems, go up year after year, offering an investment return that can surpass stocks, bonds, even precious metals.

The coin market is a collector’s market. At the end of every sale is someone who wants to own something that is both rare and beautiful, something that “they aren’t making any more of”. Coins fit the bill perfectly. While beer can collections got hot and faded away, the market for rare and beautiful coins lives on.

So how can you take advantage of it? How can you buy and sell coins, make a profit, and accumulate enough “winners” to pay for it all? It might be easier than you think.

But while the coin market is a collector’s market, it is also an expert’s market. That means if you’re going to compete, you’ve got to be informed. There are literally dozens of magazines for coin collectors, some which give prices, some which explain trends in the market. Some are free “ezines” that will come to your inbox and some you can buy at the airport magazine stand. The first step to becoming a successful coin buyer and seller is to understand the market, what coins are “hot”, and why. That will give you insight into what coins may become hot in the future.

When you learn about the coin market, you’ll quickly find that there are four main factors that go into a coin’s value.

The first is the metal the coin is made of. Gold coins, for example, are going to hold a certain price because of their metal content. This price will generally be tied to the “spot” market for that metal. But the price of the coin above the metal value, known as its “numismatic” value, is where the returns for the successful coin speculator will be made.

The first item that makes up a coin’s numismatic value is its rarity. When I was looking for that “special” 1972 penny, I did not find it because it was rare. It was an error of which only a few escaped the mint. Maybe none made it to my bank. But the fact that there were so few to be found made it valuable to those who had them or those who wanted them.

A good coin book will give “mint numbers” for every year and denomination of coin, and these serve as a good guide to general rarity. But you must go further, because not all coins made it into circulation. Researching several of the specific dates and denominations that you are interested in will help you discover where something is more rare (like a three-legged buffalo nickel) or less rare (like a silver dollar that the mint kept in a warehouse for years but has since sold to collectors) than the raw numbers might indicate.

The second item that makes up a coin’s numismatic value is its condition. Since coins are often collected for their beauty, it makes sense that a “pretty” coin, one that has no holes punched in it, is not bent or discolored, and is in the closest condition to when it left the mint, is going to command the greatest collector interest.

Any good book on coin collecting (and there are hundreds) will describe the generally-accepted rules for grading a coin. A coin can grade from poor condition all the way up to “mint state”, with a number from 1 to 70 accompanying it.

So how do you know what condition the coin is in? Or better yet, what if the person you’re buying from or selling to does not agree? The best solution is to deal in coins that have been “professionally” graded. There are several grading services that, for a price, will grade your coin, tag it, register it, and enclose it in a plastic case. And while the condition remains someone’s opinion, it is nonetheless the opinion of a professional who is not involved in your transaction. It is the opinion of a neutral third party. Having a coin professionally graded will also help with its liquidity, explained below. Better yet, buying only coins that have been professionally graded will protect your investment.

The final item that makes up a coin’s numismatic value, at least to you, is going to be its liquidity. That means simply, “How easily can I sell this coin, and for how much?” Coins are easy to buy, but they can be difficult to sell. In order to ensure that you get the most at sales time, it’s going to be important to pick coins that are liquid.

First and foremost, that means American coins. That 1929 peso may be pretty and it may be rare, but if there are few collectors of pesos, you will have a hard time getting rid of it at a decent price.

Secondly, that means coins of popular denominations. Lincoln cents are popular. Silver dollars are popular. Half dimes are less so. That means your “market”, the group of people you’d like to sell your investment to, is going to be larger for popular issues. That’s important to remember when you put your own money into coins.

So once you’ve picked up your books and magazines and picked a denomination that interests you, the hard work begins. Take a look at every date and mint and condition in that denomination. Are all the prices the same? Or are there a few that really stand out? Then find out why that is. That price is the market telling you this coin is worth more than that coin. Maybe it’s rare. Maybe it’s popular. Maybe there’s something special about it. You’ll need to find out why. Then you can decide if it will remain popular (you can be pretty sure it will remain rare).

Then find an older price guide and look the same coins up. Are they going up in price? Are they going up more than other similar coins? Again, find out why. Read the magazines, talk to collectors or dealers. The key to success is knowing the market, and you can only know it by meeting the people who are the market.

If you find a coin that seems to be rising in value compared to others, it may be one to seek out and buy: if you know why it’s going up and if you think the trend will continue.

Then you’ve got to cut out the middleman if you can. You will not make any money selling coins back to the corner dealer where you bought them. He’s got to make a profit, too, and the ‘spread’, the difference between ask and sell prices, is his profit. It will eat yours alive. There are many places where you can buy coins that do not have dealer markup. Those are the places to frequent, whether online auctions (be careful!), or coin shows with lots of dealers. Most of the best deals are made before the doors open, so you’ve (again) got to learn the market, know the market, meet the market. You’ve got to go where you can buy wholesale and sell retail, unless you plan on holding your coins for many years. You’ve got to buy from the dealers as a dealer, and you’ve got to sell to collectors as often as possible.

The most important issue when it comes to selling to collectors, however, is to think like a collector. That means becoming a collector. When you look at a coin, will you see a thing of beauty? Or will you see a sucker on the other end of the transaction? If you see coins as valuable art objects, ones that you would be proud to own and display, keepsakes that you’d love to pass to your children, you can be sure that you’re looking at a coin that another collector would be proud to own as well.

That’s how you’ll make a profit: selling something of value to someone who wants it and is willing to pay top dollar for it. You’ve got to provide a service. Find it, bring it to him, and have him walk away happy. Because if he walks away happy, he’ll walk back someday for more.