Webster’s defines “rare”
as something not frequently found; scarce; uncommon or unusual.
The word “rare” as it is used in the numismatic industry has
a more vague meaning. Because a coin’s rarity is relative, many
coins are referred to as “rare coins” even though there may
be 500,000 of that specific coin in existence. For example,
484,000 specimens of the famous 1909s VDB Lincoln Cent were
minted, and more than 4,000 have been certified by the leading
third-party coin grading services, yet that coin is deemed to
be eminently rare and desirable.
A coin can be “rare” because
of a relatively low mintage, a low survival rate, and/or because
nobody wants to sell the specimens they have. Demand also plays
a role in a coin’s rarity. If there is only one specimen of
a coin and ten people want it, it is “rare” relative to the
demand for it.
The condition is very important.
Although there is no specific grade to exclude, the general
rule of thumb is that a higher grade coin from a certain series
will usually be in greater demand and will outperform the lower
grade example of the same coin in terms of appreciation.
Today, several third-party
services exist which can objectively determine the authenticity
and condition of coins. The two largest of these are the Professional
Coin Grading Service (PCGS) and the Numismatic Guarantee Corporation
(NGC). These companies encapsulate the coins to protect them
from future damage and assign a unique serial number to each
coin, so that its identity may be verified. Both PCGS and NGC
issue a written guarantee of their conclusions on the authenticity
and condition of the coin. Their opinions and guarantees are
widely respected in the rare coin industry.
While there are currently
two teletype/computer trading exchanges in existence for coins,
these trading systems are not the heart of the industry. Generally
speaking, the coins traded on theses systems are the more common
coins that exist in large quantities or the low end coins in
a particular grade. At this time, the heart of the numismatic
community is the great demand that exists for attractive and
truly rare coins. these coins are usually purchased on a sight-seen
basis among the most knowledgeable dealers and collectors.
Liquidity refers to the
ease with which the coins can be sold. While rare coins are
illiquid when compared with futures contracts or securities,
they are by far the most liquid “collectible.” Most coins can
be sold (if you are a motivated seller) within one to seven
days in the United States.
Yes. As with any economic
good, rare coins are subject to the laws of supply and demand.
While more popular rare coins have a more enduring demand, and
are therefore less likely to decline in value, by 1996, some
rare coins were trading at 15-20% of their 1989 highs. Nevertheless,
there are examples of where, despite the previous bear market,
rarities have brought prices in excess of anyone’s expectations.
Coins can be kept anywhere
they are protected from theft, mechanical damage, or harsh environmental
conditions. The chemically reactive nature of copper and silver
in coins can cause them to corrode and tarnish severely, seriously
impairing their values. A dry area with an even temperature
works best to maintain the coins’ conditions. The two most popular
places for storing coins are in safety deposit boxes or in home
Yes. Coins can be insured
under your home owner’s policy or you can purchase a separate
policy. Coin insurance is also available from the American
Numismatic Association, 818 North Cascade Ave., Colorado
Springs, CO 80903-3279.
Different types of coins
have different collector bases. While high quality coins may
be found in all metals, gold and silver coins are often the
most sought-after by collectors and investors alike. Nickel
coins have a fairly liquid market, while copper coins tend to
be somewhat unpredictable because they are difficult to maintain
in good condition (humidity affects them more).
Coins can be obtained from
all these sources. Auctions can provide interesting information
and access to major rarities; shows can allow for easy comparison
shopping; and dealers can assist you in building a collection.
The coin grading services
each have a network of authorized dealers who can assist you
in getting coins graded. These dealers can help you by prescreening
your coins and determining which ones are worth submitting to
the grading services. They can also counsel you about the best
level of service to use and the best time to submit your coins.
Professional Coin Grading Service (PCGS) and Numismatic Guarantee
Corporation (NGC) are the two largest coin grading services.
generally speaking, it costs $25.00 to $50.00 to have a coin
graded (unless you want next-day service).
Coin grading is not an
exact science. Grading opinions may vary, and mistakes can occur.
This is why it is important to become educated and to build
a relationship with a reputable dealer, to ensure that such
mistakes do not occur with your coins.
High quality coins can
be obtained from numerous countries, and many collectors follow
each series. Currently in the United States, U.S. coins are
most actively traded because collectors are more familiar with
U.S. coins than they are with non-U.S. coins, making U.S. coins
more liquid than coins from other countries. Because of a general
lack of knowledge of coins from other countries, major non U.S.
rarities may trade at a fraction of what a comparable U.S. coin
might cost. Some investors believe that non-U.S. rarities may
represent key opportunities for future appreciation, and also
be worthwhile additions to their collections.
No. Dealers are as individualized
as coin collectors. While the majority of dealers are ethical
and honest (as with any other field of endeavor), each has a
different personality and style which may or may not blend well
with your own. Some may be struggling to make a sales quota
to cover expenses daily, while others may be looking to the
long run to build a solid customer base. Look for the dealer
who has your best long-term interests in mind. You might ask
him questions like, “How long have you been in the business?”
“Where do you get your coins?” “Why do you think I should buy
that particular coin?” Due to the confidential nature of the
business, even the best dealers may only be able to supply you
with a reference or two. As an alternative, press releases about
the broker from unbiased sources could be requested.
The rare coin industry,
like many others, falls under the Federal Trade Commission's
jurisdiction. Also, to the extent that sales occur through the
U.S. Mail, the U.S. Postal system may have something to say
about the way business is conducted. Both sets of regulations
are fairly broad and therefore prohibit such things as fraud
and theft, etc., but as yet, the thousands of rules and bureaucratic
red tape that govern the futures and securities industries do
not apply to rare coins. To some extent, because of the international
nature of the coin industry, it is difficult for any one government
to regulate the industry - it might chase the business out of
the country. For the time being, it’s still caveat emptor!
For collectors and investors,
rare coins are “capital assets” (see Internal Revenue Code Section
1221); therefore, any gain or loss upon their sale is treated
as a capital gain or loss. Such gains or losses are reported
on Schedule D of the individual’s Form 1040 tax return.
No. Under current tax laws,
individual sales of rare coins do not need to be reported to
the Internal Revenue Service by the dealer’s purchasing them.
Each individual seller is obligated to report gains or losses
on his/her own tax return.
Coins can perform very
well as an investment, or they can perform very poorly, depending
upon their quality and the timing of their purchases. Attractive
coins purchased at reasonable prices in the right grades and
complete sets can be very easy to sell at a profit. On the other
hand, ugly, overgraded and overpriced coins can generate a substantial
loss upon sale.
By way of example, Mr.
Louis Eliasberg, Sr. endeavored to collect every date, mint,
and denomination of U.S. coin. He was successful. Not only was
his collection complete, but his specimens were of the highest
“investment type” quality. Estimates value his total purchases
at $400,000 (purchases from the 1920s thru the 1950s). When
his coins were sold at public auction in 1996 and 1997, the
proceeds exceeded $44 million, representing more that
a 200% annual return.
By way of contrast, common-dated
Barber Quarters dated between 1892 and 1916 were trading at
$5,000 on June 2, 1989, in MS 65 condition and are currently
available at $1,200. common date $20 Liberty gold coins (Proof
65) were trading at $52,000 on June 2, 1989, and on June 2,
1997, they were $20,000.
There are several reasons
to purchase rare coins. First, they aren’t making them any more.
The supply is limited and, in some cases, shrinking, which means
that their prices are primarily affected by demand and inflation.
If prices realized for rare coins at auctions are any indication,
demand is on the rise, because inflation has been relatively
low lately and prices realized went up during the first half
Secondly, they are portable
and not as traceable as some other media of exchange. You can
carry a rare coin worth $500,000 in your pocket without anyone
knowing it. In other words, they are a “private” investment.
Lastly, they can be fun
to collect. Some coins are pretty, and the older they are, the
more history can be associated with them. Some people enjoy
researching what was happening in Peru in 1838, Transylvania
in 1588, or the United States in 1792 when they buy a coin from
those lands of that vintage. Collecting sets can also be a rewarding
challenge for some collectors.
Knowledge is very important
in the rare coin business. is a coin AU 50 or MS 60? It makes
a tremendous difference in it’s value, but how do I grade a
coin? How to grade U.S. coins by James L. Halperin may prove
helpful. The American Numismatic Association (ANA) offers free
coin-grading seminars at their annual convention and has a monthly
publication for those who join the association. A Guide Book
of United States Coins (The Red Book) by R.S. Yeoman comes out
every year (1997 was its 50th edition) with prices and pictures.
If coins are graded by a grading service this greatly reduces
the need to be able to grade coins yourself.
Current periodicals, such
as Coin World and Numismatic News can keep you in touch with
current market conditions. If you are primarily interested in
U.S. coins, Walter Breen’s Complete Encyclopedia of U.S. and
Colonial Coins is exceptionally useful. For world gold coins
there’s Gold Coins of the World, revised and edited by Arthur
L. and Ira S. Friedberg.
The information contained
herein has been compiled from collector/investor/dealer/ wholesaler
sources believed to be reliable.
We make no representation
or assurance as to the accuracy or completeness thereof. The
rare coin market is volatile and involves risk; therefore the
contents of this booklet are intended for use only by individuals
aware of, suited to, and financially able to bear the risks
associated with purchases of the kinds described herein. Opinions
expressed herein are statements of judgment only. Past performance
cannot be viewed as assurance of future performance. Thomas
M. Pilitowski, his affiliates, principles, employees, and clients
may from time to time have positions in coins mentioned. All
contents hereof are qualified by this disclaimer, and any suggestion
to the contrary is of no effect.
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