Investing in Coins: How to Get Started

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Contributor, Benzinga
July 11, 2024

Coins, whether rare collectibles or bullion, offer a tangible and historically proven store of value. Rare coins, such as those with limited mintage or historical significance, can appreciate in value over time due to their scarcity and demand among collectors. On the other hand, investing in bullion coins, such as gold or silver coins, provides a way to hedge against inflation and economic uncertainty.

When considering investing in coins, it is important to do thorough research and understand the market dynamics. Factors such as the condition, rarity, and demand for a particular coin can greatly influence its value. Working with reputable dealers and experts in numismatics can help investors make informed decisions and avoid potential pitfalls. Additionally, setting clear investment goals and understanding your risk tolerance are crucial aspects of investing in coins.

Is it a Good Idea to Invest in Coins?

Coins can make a good long-term investment as part of a buy-and-hold strategy. While the rare coin market is prone to fluctuations as demand for a particular coin increases and wanes, rare coins are considered relatively nonvolatile assets. However, as with any investment, successful investing depends on in-depth market knowledge and an appreciation of the risks involved.

Investors need to understand market trends and investment opportunities. Like other speculative asset classes, some coins have shown dramatic increases over the years, like the famous 1913 Liberty Head nickel, while others have lost value. Consider the pros and cons of investing in coins to build a risk-balanced investment strategy.

How to Decide What Coins to Invest in for Profit

Factors that make coins valuable vary. Generally, these include:

  • Metal content
  • Collectability
  • Condition
  • Rarity

Coins are also graded by the strike, surface preservation or rim dents, luster coloration, tone and eye appeal of the coin. Grading can be subjective, and sometimes even experts disagree about a coin's grade. You can look for professionally graded coins, although there are different grading systems in Europe and North America. Generally, the more highly graded a coin is, the more valuable it is.

9 Tips for Investing in Coins

If you're ready to consider investing in coins, you don't have to make a large investment. While an American Eagle gold coin could cost over $2,000, you could invest in Indian Head Pennies for just $2 to $5 each or Buffalo Nickels for around $2. Here are considerations to weigh when building a coin investing strategy.

1. Educate Yourself About Numismatics

Start by educating yourself about the world of numismatics (the study and collection of coins). Learn about different types of coins, their history, rarity, grading systems and market trends. Understand the factors influencing a coin's value, such as mintage, condition, historical significance and demand. There are a number of investment guides that suggest strong initial coin investments. Also, check out Benzinga's recommendations for the best coins to invest in.

2. Set Investment Goals

Determine your investment goals and time horizon. Are you looking for short-term gains or long-term appreciation? Are you interested in building a collection or focusing on specific types of coins? Clarifying your goals will help you make more focused investment decisions. Also, consider what percentage of your total investment budget will be invested in coins. Whether you choose to invest 3% to 5% in coins, or start initially with a few coins, balancing coin investments with other asset classes is essential.

3. Start Research and Due Diligence

Research specific coins or series you are interested in. To assess their performance and potential, study past price trends, auction records and historical data. Consider consulting reputable numismatic publications and websites or seeking advice from knowledgeable collectors or dealers. Be sure to ask questions and research carefully to gain an understanding of market trends and what to look for.

4. Establish a Budget

Set a budget for your coin investments. Determine how much capital you are willing to allocate to this asset class. Be mindful of the costs involved, including the purchase price, fees, storage expenses and potential transaction costs when buying or selling. Consider the effect of purchase and storage fees on total coin appreciation. Because of these high costs, most investors purchase coins they plan to hold long-term.

5. Choose a Reliable Dealer

A reputable coin dealer specializing in the type of coins you are interested in can guide you through the process and offer expert insight. Look for dealers with a long-standing presence, good reputation and memberships in professional numismatic organizations. Seek recommendations from experienced collectors or conduct thorough research to ensure you are dealing with a trustworthy source.

6. Pay Attention to Quality and Authenticity

Pay close attention to the quality and authenticity of the coins you consider investing in. Grading services such as the Professional Coin Grading Service (PCGS) or Numismatic Guaranty Corporation (NGC) provide professional opinions on the condition and authenticity of coins. Graded coins often command higher premiums and provide added assurance to potential buyers.

7. Ensure Storage and Security

Determine how you will store and protect your coin collection. Invest in proper storage options such as coin albums, holders or fireproof safes to preserve the condition and value of your coins. Consider obtaining insurance coverage for your collection to protect against loss or damage.

8. Stay Informed

Continuously stay informed about the coin market, new discoveries and changes in collecting trends. Subscribe to numismatic publications, attend coin shows, join collector forums and participate in discussions to stay updated on industry news and insights. This additional understanding will better prepare you to understand industry trends and recognize value.

9. Practice Patience and Long-Term Perspective

Investing in physical coins often requires patience and a long-term perspective. The value of rare or collectible coins can appreciate over time, but substantial returns may take years or even decades. Be prepared for fluctuations in the market and avoid making impulsive decisions based on short-term trends. Remember your long-term investment strategy.

Pros and Cons of Investing in Coins

Investing in coins has many advantages. Connecting history and geography to current wealth-building strategies is an enjoyable hobby for many investors. You'll be able to interact with like-minded investors and gain an in-depth understanding of metals, coin quality and historical significance.

Pros

  • Tangible asset
  • Easy to buy
  • Universally recognized and can retain value even in market downturns
  • Diversifies your investment portfolio
  • Generally, a liquid asset, allowing you to sell when needed
  • Significant profit potential and appreciation over time
  • An interesting and fun hobby
  • Beautiful and intriguing

Cons

While coin investing can be interesting and profitable, it's not for everyone. Here are a few downsides to weigh before investing in coins:

  • Without expert knowledge, properly assessing a coin's growth potential can be challenging.
  • Even within grades of identical coins, pricing can vary.
  • Like any other investment, investor sentiment or valuation changes can mean a particular coin loses value.

Where to Invest in Coins?

Should You Invest in Coins?

Investing in coins as part of a diversified investment portfolio can be a way to hold an alternative asset class with enduring value. If you're willing to take the time to learn about coin investment opportunities and understand coin grades and market trends, coin investment can be lucrative and fun. As part of a risk-balanced investment strategy, coins can add diversity and enduring value to your portfolio.

Frequently Asked Questions

Q

Which coin is best to invest in?

A

Popular coins for investment include the 1921 Peace Dollar, the 1878-CC Morgan Silver Dollar, the 914-D Lincoln Cent, 1932-D Washington Quarter, the American Gold Eagle and the Morgan Dollar.

Q

Is it worth investing in coins?

A
Whether investing in coins is worth it depends on your individual financial goals, risk tolerance, and investment timeline. If approached thoughtfully and with a solid understanding of the market, investing in coins can potentially offer a tangible and historically significant way to diversify your investment portfolio and potentially see returns over time.
Q

How can I invest in coins?

A

As a beginner looking to delve into the world of coin investment, there are a few key steps to keep in mind to ensure a successful venture. Firstly, it is essential to conduct thorough research on the different types of coins available in the market. Understanding the market trends, historical performance, and future potential of various coins will help you make informed investment decisions.

Alison Plaut

About Alison Plaut

Alison Kimberly is a freelance content writer with a Sustainable MBA, uniquely qualified to help individuals and businesses achieve the triple bottom line of environmental, social, and financial profitability. She has been writing for various non-profit organizations for 15+ years. When not writing, you will find her promoting education and meditation in the developing world, or hiking and enjoying nature.