Dr. Sol Taylor

Are Coins a Good Investment?

By Dr. Sol Taylor
"Making Cents"
The Signal
Saturday, June 2, 2007

his commonly asked question has a good answer: "Yes." The caveat is, of course: Just accumulating lots of common coins, or even old silver coins, is not a good investment idea.
    Even buying proof sets every year from the Mint is not necessarily a good investment. In fact, the past 40-year history is barely a break-even proposition, as many older sets have declined in value while a few more recent issues have appreciated significantly.
    The rule for "investments" is to buy coins at major coin auctions that are certified and of the highest grade available for the particular coin. Take a few examples: In 1998, a 1955 doubled-die cent graded MS-65 RD sold at a major auction in Florida for $16,500. The same coin sold in 2006 at another auction for $32,000.
    In 1974, the first coin to reach $100,000 was a mint-condition 1794 silver dollar. Two years ago, the same coin sold for more than $1 million.
    Investment coins bought at auction have a pedigree, a certificate of authenticity (certified by a major grading service), and can be easily tracked for pricing over the years.
    In 1968, Aubrey Bebee stunned the numismatic world by paying a record $46,000 for one of the five known 1913 Liberty Head nickels. Today the same coin is worth more than $4 million.
    On a lesser scale, many coins selling at auctions in 2000 for $1,000 to $5,000 are reselling today at four to 10 times that amount.
    The key criteria in selecting the "right" coins for one's portfolio — it used to be for one's "collection" — are: price (coins priced under $1,000 tend to be less investment quality), certified by a major certification service such as PCGS or NGC (there are others, as well); highest grade available for the particular coin (many coins have grades above MS-65, but for older issues, such as pre-1836, MS-64 may be the highest available grade); population data (it is preferable to acquire coins with small known populations — let us say under 20 known for the grade with many fewer in higher grades); and finally, eye appeal. Buyers often will compete for coins with full mint luster or attractive colorful toning, or needle-sharp details.
    Coins touted as "investments" in newspaper and magazine ads are not considered by most collectors and numismatists as "investments." They often include common-date Morgan dollars, common-date gold coins, and modern (21st-century coins including the current 50-state quarters).
    Common silver coins dated 1964 and earlier were selling for three to four times face value only a few years ago. Today they are selling for nine times face value. However, one would not consider buying a bag of such coins today hoping to achieve the prices of silver coins in 1979 and 1980, when they peaked at 25 times face value and then slid rapidly down to three times face value just a few years later. This is speculative coin buying, not investing.
    Also, coin investments tend to do very well in decades, not years — although, of course, some years see spectacular leaps in prices. Imagine if the oil barons of the world suddenly became coin investors. The rare coin market would explode.
    When the estates of serious coin collectors and investors such as John J. Pittman, John J. Ford, Grover Criswell, Gregory Brunk, Abe Kosoff, Jerry Buss and others come on the market, the buying interest peaks at auction time and many new records are set, especially for the rarer items in the estate, since they don't come up for sale but once or twice in a lifetime.
    For the investor, buying rare coins at auction does not require a broker, does not require excessive paperwork, and does not require annual fees. And the auction firm often will be in contact with the buyers down the road to offer them incentives to put up the same coins for auction in the future and guarantee a strong return — even in a period as short as one year. Such coins should be kept in a safe or bank vault.
    In several analyses comparing rare coins to other investments, rare coins tend to outperform other fields — stocks, commodities, real estate and various joint ventures — in the long run. Several of the larger auction firms provide such comparison charts, e.g., heritage.com.
    The other tangible benefit of investing in rare coins is that they are very beautiful to hold and admire.

    Dr. Sol Taylor of Sherman Oaks is president of the Society of Lincoln Cent Collectors and author of The Standard Guide to the Lincoln Cent. Click here for ordering information.