Protecting Yourself When Purchasing Rare Coins
Protecting Yourself When Purchasing Rare Coins
The promise of a quick and profitable turn-around on a rare coin investment has helped unscrupulous hucksters defraud millions. However, there are some things to keep in mind to make your experience with rare coins be both enjoyable and profitable.
The attorney generals of just about every state have issued warnings in recent years regarding telemarketing scams involving rare coins. This is a truly unfortunate development for legitimate rare coin dealers and numismatists everywhere. Such frauds usually promise quick turn-around and guaranteed profits. However, a little common sense can help anyone, no mater how new they may be to rare coin collection, to protect themselves in this market.
Do Your Homework
Knowledge is power, and this is just as true in the case of rare coins as it is with any other investment. Just because you've used coins in commerce for your whole life doesn't mean you know anything about the rare coin marketplace. If someone does call you and make some seemingly air-tight claims regarding past performance and future earning potential, you should be ready to look up their facts and verify the data.
It is also recommended that you deal exclusively with real people and real coins that you can see, rather than disembodied voices on the phone or the Internet. A rare coin dealer of good-repute in the US will be registered with the state as a legitimate business. If you suspect a dealer of running a fly-by-night operation, check with the state to see when the business was founded. Check also with the Better Businesses Bureau to see if there have been any complaints against the business.
Expect to Wait Awhile for Returns
Though not nearly as un-liquid as a home or most businesses, you can almost without fail expect a good return on rare coins if you’ve got time to wait. The value of a rare coin is determined by three general rules:
1. The rarity of the coin 2. The condition of the coin 3. The demand for the coin
This means that if you have a rare gold or silver coin and a hot market, you’ll still be stuck if the coin is in poor or only fair condition. That said, the rarer the coin is, the less important quality becomes. What never changes is the influence of demand. Whether that demand comes from numismatic collectors or the investors who operate on their guidance, and eventually demand always increases unless the rarity changes.
Rare coins always become rarer unless a discovery of coins is made. Usually, this is the result of coins entering or exiting private ownership for many years, or being melted down, as was most famously the case in the early 1980s when the spot-price of both gold and silver rose dramatically.
When held for a minimum of 5-10 years, the vast majority of rare coins will perform better than most other types of investments. In fact, rare gold and silver coins have been shown to appreciate in real value (faster than inflation) over the course of several thousand years.
Keep these variables in mind when considering a rare coin purchase. Don’t be afraid to get a second opinion on the condition of your gold or silver coinage, especially when done for investment purposes. Coins are a good way to hedge against inflation and to diversify a portfolio that might otherwise be exposed to too much market risk.
