Do I have to Buy the Best Quality Coins to Make Money?
Buy quality! Buy quality! Buy quality! That's all you
hears these days when you are considering rare coins as an
investment. First, are you really buying coins as an
investment, or merely for the pleasure of owning a piece of
history? That is sometimes the real dilemma for many
collectors, or is it investors? Everybody wants to make sure
that their investment is protected, but there are no
guarantees, especially in rare coins. In fact, some rare
coins take years to appreciate to the point of being able to
sell it profitably.
Hey, I would love to be able to plunk down $100,000 for a 1919-s Standing
Liberty Quarter in MS67 condition certified by PCGS. There is only one coin with
this date certified by PCGS as of February 7th so it is the finest available.
But not many of us have that luxury. I don't, and I suspect you do not either.
It's hard to comprehend paying more for a single coin than my first house cost.
And while the rarest and finest of all rare coins have reached stratospheric
prices, what does this leave the rest of us? Not much, unless you are willing to
do a little work.
So if my interest is in rare coins as an investment, what do I do? Well,
there are many other coins and options you can choose. First, let's review what
drives the price of a coin.
1. Demand. Demand perhaps is the biggest driver of price. A clear example of
this is the 1909 S VDB with a mintage of 484,000 and an estimated retail value
of $720.00 in G4 and $7,500 in MS65 vs. an 1879 Shield Nickel. The Shield Nickel
had a mintage of only 29,100 yet the estimated retail value of a G4 is only $415
while the MS65 example is $1,950. To further illustrate this point, PCGS has
certified 703 MS65 Red 1909 S VDB cents and only 27 MS65 Shield Nickels. How
many Shield Nickel collectors do you know vs. Lincoln Cent collectors?
2. Scarcity. Generally speaking, putting demand aside, the more scare/rare a
coin, the higher its value. This is usually very true, especially when comparing
dates within the same series. Scarcity should not be confused with overall
mintage. During the silver booms, many, many silver coins were melted for there
bullion content. Additionally, some coins with higher mintages can be quite rare
in certain grades such as higher MS condition coins due to weak strikes, etc.
3. Condition. This is the most obvious one. When comparing the same coin, the
better the grade, the higher its value.
4. Age. Although age can have some factor, I would rate it lower than the
three above
Ok then, considering all these factors, how do I find nice coins that I can
afford that will not only appreciate in value, but appreciate at a higher rate
than other coins? I think the key word here is “nice”. Coins other than Mint
State coins can appreciate in value if you know what to look for. Look at the 4
driving factors of price again. They are demand and scarcity. Take a good look
at the following chart. The chart shows a good comparison of some different
coins. Some you might consider a good investment and some you may not. The main
comparison I am trying to make is from 2005 to 2006. I had an old issue of Coins
Magazine from November 1973 so I thought I would throw those values in as well.
First, let's look at the 1877 Indian Head Cent, the key of the series. In a
one year period of time, the value of the coin rose 18-19% depending on
condition. The 1909 S, the coin with the lowest mintage of the whole series rose
only 2-3%. Take a look at the mintages. The 1877 had over 2.5 times the coins
produced than the 1909 S yet is valued much higher. Part of this is demand and
there are probably less 1877 dated cents to go around.
Next, take a close look at the 3 Lincoln Cents in G4. While the 1909 S and
1931 S are considered keys just as the 1909 S VDB is, it is the 1909 S VDB that
has risen in price while the 1909 S did not budge and the 1931 S moved ever so
slightly. It is interesting to note though that in XF condition the 1909 S VDB
stayed the same.
Compare the mintages of the 5 above coins to the 1879 Shield Nickel. A mere
29,100 nickels were produced that year yet the price for a G4 is a paltry $415
So, what does this all prove? To me, it proves that picking coins solely for
investment is as tricky as playing the stock market. You just never know what
may be the hot item. Certainly, key issues will continue to rise and will
probably rise at a higher rate than non-key issues. If you are truly set on
buying rare coins as an investment and you cannot afford the high-end items then
keys in some of the lower grades may be the way to go.
What will be the next “hot” coin? Only time will tell and your guess is as
good as mine. I suspect that with more and more interest in Lincolns, especially
with the upcoming changes to the Lincoln Cent , there will be more demand for
Lincoln Keys, but that is only a guess. Others to keep an eye on are the 1932 D
and S quarters. The State Quarter program has created more interest in quarters.
This is just pure speculation. As for me, I will just continue to buy the coins
I like.
As always, happy collection!
Keith Scott has been a collector for over 30 years. His website has
US coins for sale. He also writes
Coin Collecting Articles for fun. Visit his websites for a history of US coins,
metal market updates and news about your favorite coins.
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