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Is Coin Collecting Profitable, or Just a Fun Hobby?
Tips on how to turn your coin collection into a lucrative investment
Many people of all ages and backgrounds enjoy coin collecting as a fun, exciting way to view different pieces of numismatic art, engage with different periods of history, not to mention the challenge of finding hard-to-get coins.
However, numismatists everywhere should also be aware of the fact that coin collecting can be a very profitable venture when done the right way.
Here’s what you need to know to pursue numismatics, both as a fun hobby and as a sound mode of investment.
What Gives Coins Their Value?
Coins derive their value from two principal sources. The first is the physical metal contained in the coin, which is also known as its bullion value. Because many collectible coins are made from precious metals such as gold or silver, they carry a certain amount of intrinsic value as stores of these metals. The bullion value of a coin can be easily calculated by multiplying the number of ounces of metal in a coin by the spot price per ounce of that metal at any given time.
The second source of value in a coin is its collector or numismatic value. This factor applies mostly to antique and rare coins, and is quite a bit harder to determine than bullion value. Ultimately, a coin’s collector value depends on buyer sentiment, but there are some guidelines. The fewer examples of a coin that were minted, for instance, the higher its collector value is likely to be due to a shortage of supply.
A coin’s condition also plays a major role in collector value, since buyers who value coins for their numismatic appeal tend to pay much larger sums for coins that are close to uncirculated condition than those that have obviously seen regular use.
Read more: The Collector's Guide to Coin Grading and Certification
How to Start Your Coin Portfolio
When you start coin collecting, it’s best to focus initially on bullion value. Though investing in rare coins can be very profitable, it is more difficult to gauge what the collector market for a particular coin might look like five or ten years down the road. Investing in modern bullion coins, such as Canadian Maple Leaf silver coins and American Gold Eagles, is a great way to get started. These coins all contain high-grade gold or silver, making them excellent precious metal investments. At the same time, they’re also handsome coins, which is an important factor for any coin collector.
Some older coins can be good stores of bullion value as well, though in some cases there’s also some numismatic value involved in the price of the coins. For example, American quarters and dimes minted prior to 1965 contain 90 percent silver and are frequently purchased by coin investors for their metal content. Ordering a mixed bag of junk silver coins is a good way to fill out missing dates in your collection while simultaneously investing in silver metal.
Some coins, such as American silver dollars, exist somewhere on the borderline between being bullion investments and numismatic investments. These coins are common enough that they don’t have immense amounts of collector value, but at the same time, they sell for prices that are higher than their raw bullion value. These coins aren’t necessarily the best investments from a growth perspective, but they do hold their value reasonably well. Since coins that fall into this category tend to be older, they’re also a great deal of fun to collect for those who love the historical appeal of numismatics. Pre-1933 gold coins also fall into this category, though their bullion values are of course much higher than silver coins.
Finally, there are many coins that are predominantly numismatic investments. Though the bullion value of the metal is still factored into the overall price of these coins, their scarcity causes their collector value to make up the bulk of their final cost. If you wish to invest in coins predominantly for their collector values, it’s important to know exactly which coins will be most in demand among collectors.
Typically, rare dates and mint marks are two of the largest contributing factors to a coin’s numismatic value. Rare minting errors can also add to the value of a coin. If investing in coins purely for their numismatic value, it’s important to deal in certified coins only. Certified coins are those which have been inspected and graded by a recognized organization, then placed in a protective holder.
One last factor to keep in mind is that, contrary to popular belief, a coin doesn’t necessarily have to cost thousands of dollars to be a good investment on the basis of its numismatic value. One of the best examples of an affordable coin that is mostly valued as a collector piece is the 1950-D Jefferson nickel. Considered a key date and mint mark pairing, a 1950-D nickel can sell for $70 or more in uncirculated grades. Though extremely high compared to its face and bullion values, the numismatic value associated with this coin makes it reasonable for collectors on a budget.
Looking for Bargains: The Key to Successful Investing
Investing in coins is like any other type of investing in that recognizing undervalued assets is important. If you have excellent knowledge of coin values, you can find coins selling at estate sales, antique stores, swap meets, and other places that are priced much lower than their real values.
Similarly, learning to successfully interpret the movements of the precious metals markets can help you optimize the timing of your purchases. When silver prices dip, for instance, it may be a good time to add some silver bullion to your portfolio. Recognizing bargains, just as in stocks, real estate, or any other class of investment assets, will help you become a more successful and wealthy investor in precious metal coins.
The Importance of Keeping it Fun
Although coins can definitely be profitable investments, it’s important to keep your coin collecting hobby fun! If you enjoy buying coins for their historical significance or beauty, you don’t have to stop just because the coins you favor may not necessarily be the best investments.
By incorporating some good investments into your collection, however, you can make some money from your hobby and explore an entirely different side of coin collecting.
