Rare U.S. Coins: The Absolute Basics
How many people believe that tangible assets have a role in asset allocation and
diversification in their financial portfolios?
There is no correct answer...just opinion.
Tangible assets are forms of wealth accumulation that existed long before stocks, bonds,
mutual funds and other paper equity assets. Wealth has been measured in gold, silver, gems, art,
animals, shells and other real assets for ages.
The wealthy client of today can and does show his status with expensive tangible assets as well
as with traditional equities. Besides the obvious homes, automobiles and yachts, wealthy clients
acquire art, jewelry, antique furniture, rare stamps, rare coins, oriental rugs, Gallé glass, Tiffany
lamps, Miessen porcelain, Fabergé eggs and numerous other physical assets.
The job of financial planners is to recognize and properly categorize these assets in the overall
plan of the client's financial position. For example, is there adequate insurance to cover these
assets, how are these assets titled, what is their cost basis for capital gains or losses, how are
they evaluated to ascertain the clients correct net worth? With a little education, rare coins are
as easy to document, evaluate and categorize as stocks, bonds and mutual funds.
It is the financial planners responsibility to provide their clients the data necessary to help them
make intelligent, informed decisions on the various areas of investment opportunity, and to help determine
whether or not these areas are suitable for their clients goals or needs. This separates them from the telemarketers
and product-pushing salesman.
The asset discussed here is among the oldest in history.
Coin collecting pre-dates the birth of Christ and has existed in every society for centuries.
Rare U.S. Coins: The Absolute Basics
Unlike bullion coins that derive their value from their base metal content, a rare coin's value is
a function of its age, its condition its limited supply and the demand it commands from collectors.
For the rare coin buyer, it is important to deal in coins of a quality that meets the objectives
of a growth portfolio. The basic guidelines for such coins are as follows:
United States Coins Only
U.S. coins have historically enjoyed a much broader base of demand than any other coinage. The
appreciation rate has been consistently higher and U.S. coins have been much more liquid. It is
estimated by rare coin experts that of the six areas comprising numismatics (U.S. coins, foreign
coins, ancient coins, currency, tokens and medallions, and numismatic publications) 95% of the activity
is based in U. S. coins. U.S. coins also are the only area of rare coins that have prices published
on a weekly basis, by the Certified Coin Dealer Newsletter and the Coin Dealer Newsletter.
In addition, U.S. coins have a nationwide computerized price network linking the top 500 dealers in the
country; it is called the Certified Coin Exchange (CCE) and operates much like NASDAQ. Further, more U.S. rare coins have
been independently certified than any other coinage.
Numismatic experts agree that only about 2% of all the coins minted prior to 1934 in the U.S. are
still available on the active coin market today. The federal government has melted down approximately
90% of all the coins it minted prior to 1934. Other coins have been destroyed by private industry
melt-downs and many have been lost through normal attrition. New empirical data, such as the PCGS
Population Reports now support more accurate statistics on survival population of rare U.S. coins.
Prior to 1986, this type of information was not available. Today's buyer can be assured of the rarity
of his purchase.
Mint State 63, Proof 63 or Better Condition
The coin industry uses a 70 point numerical grading scale to define the condition (grade) of a rare
coin. Mint State (MS) coins were originally struck for general circulation. Proof (PR) coins were
specifically struck for coin collectors. Only coins grading MS63 or PR63 or higher are recommended
for purchase because they traditionally have shown the highest rates of appreciation.
PCGS or NGC-Certified
The Professional Coin Grading Service (PCGS) and the Numismatic Guaranty Corporation (NGC) are independent,
third party grading services that are widely recognized throughout the numismatic community as leaders
in the field of rare coin certification. Once graded, the coins are sonically sealed in tamper proof,
inert hard plastic holders (commonly called "slabs") to protect the quality of their condition. PCGS or
NGC certification is your guarantee of grade and authenticity. PCGS and NGC are the number 1 and 2 ranked
grading services in the world today. PCGS has graded over 4 million coins and NGC has graded over 800,000
coins. There are several other grading organizations that exist. However, only PCGS or NGC coins are
recommended due to their nationwide acceptance.
It is important to note that rare coins are NOT bullion coins. When discussing rare coins,
some will say "I have some Kruggerands and Maple Leafs. Are those rare coins?". The answer
is no. Those coins are bullion coins. Like gold or silver bullion bars and ingots, the value of bullion
coins fluctuates according to the value of their metal content. Bullion coins are simply a convenient medium
for trading in bullion. The values are quantitative, based on how much bullion (number of ounces) you own.