The Bret Leifer Rare Coin Letter
April 2002 NEWSLETTER
Professional advice you can trust
Unlike stocks, bonds, mutual funds, and other paper assets, US rare coins can be seen, touched, and admired. They are tangible links to our nations past. Just as important, rare coins have been a proven way to accumulate long term wealth. Besides, collecting coins can be great fun.
Before the late 1970’s, most collectors were merely hobbyists. They collected out of a love of coins’ beauty and rarity. They wanted to fill out their sets. Today, collectors are often sophisticated investors who might use rare coins to add a little balance to their portfolio, and as hedges against inflation and the uncertainties of the stock market and paper assets. The private nature of coin ownership also has strong appeal for some investors. Many collectors are still having great fun building those wonderful sets of coins.
For the seasoned high profile investor, it is paramount to only buy coins that have been graded by a prominent third party certification company. Part of the transformation of rare coins from hobby to mainstream investment began in 1986, with the creation of PCGS (Professional Coin Grading Service), which developed a standardized system for grading high quality coins.
PCGS and a couple of other grading services have brought strict, reliable grading standards to the industry, and the public is the primary beneficiary. Ironically, most people are not aware of the opportunity in the numismatic market. The public, for the most part, has no idea of what many numismatists have always known! You can make money in the rare coin market.
There is one huge caveat, “Dealer Risk is Greater Than Market Risk”. You should make sure you understand this. All dealers pay about the same for coins, but then there is the overhead, the sales commission, the variable expense, and of course, the profit. So, if you do get involved with buying coins, do your homework. Check out a dealer’s qualifications. How long has he been in business? How much is their mark-up? That’s a great question. Few dealers will want to answer that one. Some dealers mark their coins up 30-80%. So, if you get involved with a dealer like that, it may be a very long while until you get your money back.
Also keep in mind that buying coins through the mail will afford you the full protection of the postal laws. Any chicanery, like non-delivery, is referred to as mail fraud and that lands the guilty person in the clink for about 54 months. You can rely on an ethical dealer to sell you properly graded, fairly priced, certified coins, offer a full refund guarantee, and perhaps provide guidelines on which coins to buy, and what coins to trade for higher quality pieces. As a trained accountant, I always counsel to get rid of the losers. Take the loss, use the proceeds to buy better coins and move on. A seasoned numismatist should tell you this. Quality usually wins the coin game.
Next, you will want to focus your attention to the most fascinating area, in my opinion. What kind(s) of coins will you be seeking? Most people make the error of acquiring lower priced or low quality coins. They do this because they feel it’s safer to have quantity and diversification than to concentrate on quality and rarity. Historically, though, quality and rarity have been the winners.
If you want to have a bullion position, then it is understandable to acquire rolls of silver dollars or the lower premium European gold coins. These items offer lower premiums over the gold or silver content of the coins themselves. Many people have this staunchly conservative approach. Some will strive for a blend, but the serious collector/investor usually concentrates on real numismatic pieces. As with any investment, there is risks involved, and keep in mind that coins produce no current income.