In recent years, another reason for involvement and interest in rare coins has arisen; that of the opportunity to make a profit on their sale after owning them for some period of time, often several years or more. As an investment, some rare coins have shown dramatic increases over the years, rewarding those knowledgeable individuals who have purchased wisely. However, if you are new to the field of numismatics, there are a few things which you should understand and keep in mind when purchasing rare coins for investment. This article will discuss and explain some of them.

Make Sure Coins Are Right For You

Coins aren't a prudent investment for everybody. If you think you'll have a need for the money you put into coins within several months or even several years, it's probably best to avoid them. Coins are a long term investment, with the best gains coming over a period of five years or more. Coins are a hedge and should be part of a diversified portfolio. Putting all, or even most of your money in one place is rarely a wise move. Insure you can comfortably meet your ordinary living expenses before you commit any funds to long term investments such as coins.

Be Sure of What You're Buying, And From Whom You're Buying It

When purchasing rare coins for investment, one of the most important considerations is their grade, or their state of preservation. The value of rare coins is highly dependent on their grade. Often, very small differences in quality translate into very large differences in value. For that reason, several independent services have been established which render an impartial opinion on the grade of a coin. These services then seal the coin in a plastic container, with its grade indicated. The process is called certification and it may provide your best protection against buying a coin that is overgraded (and consequently overpriced). Three companies, among others, which offer widely recognized and respected grading opinions are the Professional Coin Grading Service (PCGS), The Numismatic Guaranty Corporation (NGC) and ANACS (Amos Numismatic Authentication and Certification Service). If you are considering the purchase of rare coins, you may want to buy coins which have been certified by one of the above mentioned companies.

Watch Out For "Modern Rarities"

Many newly minted coins are marketed through advertisements and direct mail pieces as semi-numismatic coins or private rarities. Usually, these take the form of commemorative coins struck for a special event or to honor a specific political or folk hero. They are sometimes (though not always) minted by small island nations and packaged in special presentation boxes with certificates of authenticity or some other variety of credibility. The U.S. Mint also produces many new commemorative coins. These pieces are sometimes touted as good investments because of their theme or restricted low mintage. While occasionally some of these do appreciate in value, the majority of these modern issues (including many of those of the U.S. Mint) have ended up valued at close to their bullion (or melt value), leaving the owner with an expensive box and certificate. If you like the subject theme represented by these coins, admire the beauty of the design or would like to own them as a souvenir or to show support for their particular cause, by all means buy them. But if your goal is capital appreciation or making a profit, you're better off avoiding this type of material.

Beware of Bargains

The biggest and costliest trap many new investors get caught in is the bargain price, good deal or the "something for nothing" offer. When purchasing coins (or anything else for that matter) for investment, be aware that there is no Santa Claus. No dealer gives something away substantially under its true market value. Every dealer is in business to make money and should be allowed a reasonable profit on each transaction. But to believe that a dealer will sell you an item for less than its wholesale value is naive to say the least. If you are offered merchandise priced "under the market," it's probably safe to assume that the goods are overgraded, overpriced or misrepresented in some way.

Do not misinterpret the message here. It pays to comparison shop. If you are buying certified coins, there may be some price variations between different dealers. Simply because one dealer can or will work on a slightly lower profit margin does not indicate that anything is wrong. Remember that in most cases certified coins offer substantial protection against buying flagrantly overgraded coin. If one dealer is selling his certified coins at 5 or 10% less than another, that is no cause for suspicion. But if a dealer is offering uncertified uncirculated or proof coins, or certified material from services other than those mentioned in this brochure at prices "below wholesale," it may be too good to be true. Reputable dealers seldom have significant price variances on investment quality coins that are also available from other dealers.

Learn About What You're Doing

There's no substitute for knowledge. Like stocks, bonds, artwork or real estate, numismatics is a highly specialized field with its own terminology and "rules of the game." In the past, the greatest financial gain has accrued to those who have taken the time to read books about coins and learn the basics before making a large investment. Plunging in, based on the promises of a telephone salesman who solicited you, is a formula for disaster.

On the other hand, taking the time to learn about rare coins, attending a few shows at which coins are sold or traded, doing some research on the subject and carefully evaluating your financial goals and personal interest can open the door to an exciting, fulfilling hobby and could very well pave the road to future financial gain.

Select A Reputable Dealer

Here Are Some Guidelines To Help You Select A Dealer

1. Check the reputation. Ask the trade organizations. Consult the hobby press. Ask other dealers and collectors. Don't be fooled by fancy brochures and flowery advertising. A few phone calls could be the best insurance you've ever purchased.
2. Consider dealer longevity. Examine very carefully any dealer who has been in business for less than five years.
3. Before you agree to buy anything over the telephone, ask yourself if what you are being promised could objectively be true; then think again. Any one who promises you a 20% return in 6 months or less is unlikely to be able to deliver it.
4. Ask about guarantees. Reputable dealers are likely to show how they back up a guarantee since they are interested in developing long term relationships and not a one shot sale.
5. Check organizational memberships. Often these organizations will intercede if there is a problem with a member dealer.
6. Ask for and check bank references.
7. Attend a major coin show. There is a major coin show somewhere in the nation nearly every week and there most certainly will be one within driving distance of you in the next six months. While there, get to know some of the dealers on a personal level. Above all, ask questions.