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| Photo credit to www.liveauctioneer,com |
I believe an investor in coins should consider several things. First, appreciation potential, since this is the ultimate goal. Many different factors go into the rate at which a coin appreciates in value, but the key ones are the existence of a meaningful (and hopefully growing) base of collectors and investors who want to purchase coins of this type and the scarcity of a given coin. Many coins are scarce but are relatively inexpensive because they lack a meaningful demand base. Conversely, even coins that are readily available in the marketplace can experience dramatic appreciation if there is a high level of demand.
Next, related to appreciation potential, is timing. An investor should be aware of relative values and should time his or her purchases of coins in a given category to reflect both valuation in relation to coins in other categories and valuation in relation to where in the value cycle a coin stands. The goal is to try to purchase coins that are relatively undervalued. For example, if an MS66 specimen of a given coin type tends to sell at twice the value of an MS65 and the spread narrows to 50% rather than 100%, an investor should focus on purchasing the MS66 and can reasonably expect it to outperform the MS65. Many coin series, such as Morgan and Peace Silver Dollars, Commemoratives and gold type coins, clearly move in definable cycles. An investor should try to concentrate purchases in series that are well off their peaks and relatively out-of-favor. It is virtually assured that at some point a new up cycle will begin.
Third, grading is a critical element, meaning both the actual grade levels on which an investor concentrates as well as the confidence in the grades of coins purchased. over the years, due to relative scarcity and a proportionately growing level of demand, higher grade coins have tended to appreciate faster than their lower grade counterparts. Unless human nature shifts, I believe this will continue. In the past, an investor had to rely on his or her own grading ability and/or that of the dealers who sold the coins. The variability in grading standards experienced in the early 1980’s exposed the risks associated with grading as it related to coin values. With the advent of the major grading services, PCGS and NGC, not only can an investor be confident of a coin’s grade but also he can have confidence in the standards used to grade the coin remaining stable.
Fourth, liquidity is important for the investor. The more desirable the coin and the larger the demand base, the easier it is to sell a coin at its true value. The existence of certified coins has helped to broaden the demand base for these coins by bringing in new investors to the marketplace. It has also allowed the formation of an active market in sight-unseen coins, further enhancing liquidity. Next, I feel an investor should have diversification in his or her portfolio of coin investments. This will minimize the risk of missing strong performance in coin categories you don’t hold.
Finally, even for investors, the esthetics of the coins purchased can help to make the whole exercise more rewarding. An investor will often be well served in buying coins that he or she finds particularly beautiful and pleasing. ( Scott. A. Travers)
Next, related to appreciation potential, is timing. An investor should be aware of relative values and should time his or her purchases of coins in a given category to reflect both valuation in relation to coins in other categories and valuation in relation to where in the value cycle a coin stands. The goal is to try to purchase coins that are relatively undervalued. For example, if an MS66 specimen of a given coin type tends to sell at twice the value of an MS65 and the spread narrows to 50% rather than 100%, an investor should focus on purchasing the MS66 and can reasonably expect it to outperform the MS65. Many coin series, such as Morgan and Peace Silver Dollars, Commemoratives and gold type coins, clearly move in definable cycles. An investor should try to concentrate purchases in series that are well off their peaks and relatively out-of-favor. It is virtually assured that at some point a new up cycle will begin.
Third, grading is a critical element, meaning both the actual grade levels on which an investor concentrates as well as the confidence in the grades of coins purchased. over the years, due to relative scarcity and a proportionately growing level of demand, higher grade coins have tended to appreciate faster than their lower grade counterparts. Unless human nature shifts, I believe this will continue. In the past, an investor had to rely on his or her own grading ability and/or that of the dealers who sold the coins. The variability in grading standards experienced in the early 1980’s exposed the risks associated with grading as it related to coin values. With the advent of the major grading services, PCGS and NGC, not only can an investor be confident of a coin’s grade but also he can have confidence in the standards used to grade the coin remaining stable.
Fourth, liquidity is important for the investor. The more desirable the coin and the larger the demand base, the easier it is to sell a coin at its true value. The existence of certified coins has helped to broaden the demand base for these coins by bringing in new investors to the marketplace. It has also allowed the formation of an active market in sight-unseen coins, further enhancing liquidity. Next, I feel an investor should have diversification in his or her portfolio of coin investments. This will minimize the risk of missing strong performance in coin categories you don’t hold.
Finally, even for investors, the esthetics of the coins purchased can help to make the whole exercise more rewarding. An investor will often be well served in buying coins that he or she finds particularly beautiful and pleasing. ( Scott. A. Travers)
Remarks: The above paragraph taken from www.usgoldexpert.com
Thanks to the comment of Mr. Haresh Assumal
