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Coin Collecting for Fun and Profits
Inside This Report
For over 2,000 years, coins struck in silver and gold have been among the most popular forms of
money ever created. From the early days of Greek and Roman coinage, Europeans have traded with gold coins and silver coins.
Ancient coins were also struck in silver and "base" metals like bronze and copper. Because of its intrinsic value, however,
gold coins have historically been the most popular medium for exchange.
Today, the U.S. Mint reports there are 125 million coin collectors in the United States. This number is up dramatically from 20
million believed to collect coins a decade ago. In addition to U.S. coin collectors, there are millions of other coin
collectors around the world! In fact, coin collecting is widely recognized as one of the most rewarding hobbies. While it
was once known exclusively as the "the hobby of kings" due to the high cost of coins, today coin collecting is for people
of all ages, from the young collectors who save the new "Statehood Quarters" to gold investors who focus on rare gold coins.
From
Coin Collecting to Coin Investing
Throughout history, many coin collections have produced substantial profits for their owners. This is particularly true for coin
collectors of this century. Harold Bareford reportedly purchased a collection of U.S. gold coins for $13,832 in early 1950s which was
resold at auction in 1978 for $1.2 million. This is just one of many anecdotal examples of how profitable rare coin collecting
has become.
Historically, the financial support for the U.S. rare coin market came from coin collectors who bought coins for their beauty and
historical significance. However, substantial profits realized by owners of rare coin collections in the 1970's and 1980's
moved coin collecting from being more than just a hobby as many investors began collections targeted at generating long-term profits.
Austin Rare Coins would like to remind prospective coin buyers to be aware that there are many different ways to collect coins. Some
coin collections are built just for the fun of it, like the new Statehood Quarters. Other collections are built with
the goal of creating long-term profits. Keep in mind that past performance is no guarantee of future results and indices used
in compiling profit statistics sometimes consist of a limited number of coins. For that reason, no representation can be made
that one individual investor's rare coin portfolio will enjoy similar results of another.
Also, the market performance of different coins varies substantially. For example, those people putting away the Statehood
Quarters are having a great time, but since the State Quarters are minted by the millions, and so many are saved in nearly perfect
condition, it may be generations before they dramatically appreciate in value, if ever.
Reasons for Appreciation
While collectors view their coin as fine art and as tangible remnants of the
cultural and economic forces that created them, investor interest is prompted by
the fact that coins of proven rarity have shown high rates of appreciation.
However, the line between the collector and investor often becomes blurred.
Collectors can't help but be pleased when coins they sell bring a profit, and
investors begin to see their coins as works of art and become knowledgeable about
the circumstances of their minting and the era in which they were circulated.
Both investors and collectors come to realize that their intellectual curiosity,
aesthetic sensibilities, and enjoyment in our country's history can be used to
create a collection that is enjoyable and that also serves as an important store of value.
Bullion Coins
Investors have also become significant buyers of bullion coins like American Eagles and Canadian Maple Leafs. These gold coins are
official legal tender coins created for the purpose of precious metals investment. Since the ban on gold ownership by U.S. citizens was
lifted in late 1974, millions of Americans have added gold, silver, and platinum coins in their investment portfolios.
Financial advisors recommend investments in precious metals as an important part
of portfolio diversification, a reliable hedge against inflation, and an enduring
storehouse of value for the long term.
Six Major Categories of U.S. Coins
Older U.S. coins minted prior to 1965, and particularly coins minted prior to the 1933 ban on gold, have proven to be among the
most popular and lucrative areas of all the rare coin categories available for collecting and investing. While it
would, of course, be impossible to profile all of the U.S. coins most commonly used for investing and collecting, here are six
key areas that are popular today among U.S. Coin Collectors:
U.S. Gold Coins - Coins minted before 1933, including Pre-Civil War and Civil
War Era Gold Coins.
19th Century & Earlier Type Coins - This would include coins minted from the late
1700's through 1899.
Silver Dollars - Morgan Silver Dollar 1878-1921 and Peace Silver Dollars
issued from 1921 to 1934.
Commemoratives - Coins specifically struck in low mintages to commemorate historic events.
20th Century Type Coins - Before 1965, this would include Silver Dimes, Silver Quarters and Nickels,
pennies, and modern issues created for circulation by the public.
Current Issues - The Statehood Quarters, Sacagawea Gold Dollars, Buffalo Silver Dollars, and all
circulating coins you can get at any local bank would be current issues.
Why Are Some Coins "Rare"
Most coins that are scarce today, started out as common issues struck in large quantities by the U.S. Mint. Even though
thousands or even millions of copies of a particular coin were originally minted, after many decades, the vast
majority were worn out in circulation, lost, or destroyed. As a result, these remaining coins in pristine condition have become
rarer and harder to find over time.
Other coins were minted in very small quantities to begin with. This group of
coins includes older proof issues, test strikes, pattern coinage, and error
coins. However, rarity refers to more than just the number of coins in existence. It is
also a function of investor/collector demand for the coin. If a coin is said to
be rare or scarce, it implies that the available quantity is small relative to
the current or expected demand for the coin in the marketplace.
How Rare Coins Are Classified
As with any investment or collectable, the value of a rare coin is established in a free marketplace by supply/demand. The size and
intensity of demand is influenced by these criteria:
1. The value of the coin's precious metals' content.
2. Its rarity, scarcity or collector value.
3. A coin's demand factor among collectors and investors.
4. Finally, there's each individual coins eye appeal and state of preservation.
Here's a brief discussion of each of these factors:
Eye appeal is affected by many things
The beauty of a coin design.
The minting process used.
The fullness and sharpness of its strike.
The brilliance of its luster.
The number of scratches or nicks on the coin's surface.
The amount of wear on the coin's raised areas.
Understanding Coin Grading
As far as quality is concerned, numismatic coins always fall into one of two basic conditions. Either they are circulated coins- coins
that exhibit wear- or they are uncirculated coins. The ANA has endorsed a grading scale that divides circulated and uncirculated
coins into 24 distinct coin grades. There are 13 circulated grades and 11 uncirculated grades.
The lowest uncirculated grade is MS-60, while the highest is MS-70. The "MS" stands for Mint State. In between, there are
grades MS-61, MS-62, MS-63, and so on, all the way up to MS-70-a perfect coin. Each step up the grading scale indicates an improvement
in quality, rarity, and usually a dramatic difference in the coin's price.
 Portfolios, Collections and Sets
Today, the distinction between collectors and investors has become blurred. This is because investors have learned that the qualities
of outstanding coin collections also produce outstanding portfolios. Many kinds of collections offer the same range of diversification
that would be provided in a pure investment portfolio. An investor should follow the same methods as a collector in formulating a strategy,
buying coins carefully over a period of years, holding them for the long term, and then liquidating them when an appropriate opportunity
presents itself when prices are high.
Perhaps the most popular and rewarding portfolio strategies, is set building. The two basic forms of collections are "type"
and "series." A type set is made up of all those coins sharing a single, specific characteristic such as design, designer,
or denomination. A series consists of one coin from each date and mint of a particular type. Other strategies include collecting by die
variety, by historical period, by mint mark, or by individual year or first and last year of issue of a particular coin.
While this overview is necessarily brief, we would love to send
you, absolutely free, several reports to help you better define
your areas of interest in rare coin collecting.
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