A Companion to Rare Coin Collecting - Introduction
Interested in rare coins? Do you want to start a rare coin collection? I wrote A Companion to Rare Coin Collecting for a group of investment advisors who needed a booklet that introduced basic concepts of the art of rare coin collecting.
For that reason, this text offers equal time to the pros and cons
of rare coin collecting. It provides good insights on how to avoid
common mistakes and provides simple layman explanations.
In the chapter "Are Rare Coins For You?" readers will find out if they fit the profile for this form of investing. "What is a "Rare Coin"?" helps define the topic of true rarity while the succeeding chapters - "Grading Services", "The Market", "How to Buy Rare Coins", "Holding Coins", and "Selling Coins" - help define the form and structure of the investment.
As to the question, "why is this book offered free?" Simply put, there are too many other better books about rare coin collecting that were written by well-known numismatists (see the 'Suggested Reading' list below). Nevertheless, since its public release to the Web in 1997, this text has been read by more than a quarter of a million readers hailing from Australia, Europe, and the U.S. Numerous webmasters and editors from all sorts of hobby sites, including prominent search engines such as Ask Jeeves, InfoSeek, Lycos, and AOL, have selected this book for their particular venues dealing with coins and hobbies. As a result, Companion is widely read by thousands of new collectors each week. I wish all of you the very best of luck - but most of all have fun.
What Kind of Collector Are YOU?
I have met many collectors - each with their own set of responses to the question, "Why do you collect rare coins?" However diverse, their answers formed three basic "personalities of coin collecting."
The Incidental Collector is the most pervasive of all personalities because her collection begins with the spare change that collects in the dresser drawer or in the bowl on the bookshelf until it graduates into a bucket then, in some extreme cases, a water bottle or some other large container that sits in the corner of the bedroom. This collection will grows until someone accidentally kicks the bucket over once too many times or until the water bottle finally breaks from the sheer weight of all that metal.
Sometimes the incidental collector is struck by what I call the 'lottery effect." A story that happened a few years ago exemplifies this tract. A clerk working at a convenience store on Hollywood Boulevard was bored. To occupy some time, he began sorting the coins in the change drawer. He ran across an old penny that had been discolored from years of handling, but he noticed that there was something wrong with the stamping. After completing his shift, the clerk did some research and was stunned to find that he was the proud owner of a famed 'double stamp' 1955 penny worth more than $3,000.
Stories like that do more to convert many incidental collectors into instant 'hard core' investors - or something with that appearance, at any rate. The very idea that chance fortune lay hidden somewhere in our pocket change is enough to set off a flurry of book buying and frantic inquires to coin dealers. In extreme cases, the 'lottery effect' can also trigger hysteric sorting and hoarding. For example, there are online rumors about the famed 'state quarters' that are circulating around the Internet faster than forwarded email jokes. Apparently, many people are taking these ill-advised advisories seriously. Dealers acknowledge that coins for Delaware, Pennsylvania, and New Jersey are now in short supply - thus in high value - however the higher value is simply due to the fact that so many incidental collectors are hoarding.
Ultimately, the incidental collector is faced with a choice: either get serious and organize the mess, or get real and dump the coins into the counting hopper. If he gets real, then worst case, he'll be rid of the inconvenience and end up with enough spendable currency to buy something nice for himself or his niece. If he or she gets that streak of seriousness then gangway for the next personality, that of The Investor Collector.
For many years, financial consultants have been advising their clients to hold coins. Their reasoning is simple: rare coins have been known to be an even-tempered and reliable investing tool because coin values seem to keep pace with other investing classes such as stocks, bonds, funds, and real estate. The value performance of rare coins is actually more predictable than the precious metals they are made from largely because value for metals is based upon a much wider range of factors than coins. It is also possible that rare coins can offer a form of 'wealth insurance' by retaining value when high inflation or low interest rates weaken paper currency values.
As for other collectibles, nothing performs as well as coins when it comes down to pure investing: coins are virtually indestructible, they are easy to store, easier to insure, and rare coins are highly portable commodities that can be easily converted into liquid assets. One of the drawbacks for investing in rare coins is that one must possess the liquid assets to acquire the right type of coins (not all coins are 'value investment' rated). But as the old saying goes, "one step at a time."
This leads us to the third and final personality: The Professional Collector. Rare coins are interesting because their rarity makes them precious and fascinating. Surely, the more that a specimen is sought after the greater its price tag, but for some collectors that's an incidental fact in a much larger story. For them, the supreme pleasure and thrill of discovery motivates a lifetime of collecting. They have a deep appreciation for the art and a history not found in your average run-of-the-mill water bottle collection. Note also that some avid coin collectors are not coin collectors at all, but numismatists - people who study all forms of monetary value including coins, but also paper money, tokens, commemorative medals, even checks, stock certificates, and notes of financial obligation.
The bottom line for coin collecting is that this is not the way to 'get rich quick' - in fact, there is nothing about coin collecting that is quick at all. It takes patience, much learning, lots of reading, and some amount of luck to grow a collection. Unless you are already uncommonly wealthy, it'll take a very long time to see your collection come to any sort of value. If you are looking for the fast track for riches, I suggest the lottery or arbitrage. If you are looking for a rewarding hobby that teaches history, culture, and the growth of civilization, then coin collecting might be for you.
About the Author: Ray Wyman, Jr. is a freelance
writer who has been working in the publishing industry since
1975. He began his career as a professional marketing communications
practitioner in 1980 and started freelancing in 1984. He is
the author of "The Art of Jack Kirby" (1993, Blue
Rose Press), "Tales from the American Civil War"
(unpublished), "A Companion to Rare Coin Collecting"
(1988, IRC&B), "Promoting Your Organization"
(1995, NetDay96), and "Achieving Vision" (1990,
The Inventioneering Project). He is a veteran storywriter
for the Star Trek franchise and is the owner and chief editor