Precious Metals: A Quick Guide to Investing in Coins

Though everyone knows coins have monetary value, few people consider them as investment assets. However, rare and antique coins can hold considerable value that continues to appreciate over time, making them good investments. Here's a brief guide to investing in coins for those who are just getting started with this interesting class of non-traditional assets.

Start by Learning About Conditions

Before you invest in coins, you need to learn a bit about them. Start by learning about the different condition ratings that coin collectors assign. These different condition grades fall on a scale known as the Sheldon Grading Scale, which runs from one to 70. Investment grade coins will typically fall in the upper ranges of this scale, though a coin that is rare enough can still have significant value in lower grades.

Most investors deal in coins that rate a 55 or above on the Sheldon scale, beginning in the grade range known as AU, or almost uncirculated. Rocky Mountain Coin and similar investment coin brokers will provide you with professional condition ratings on all coins.

Learn Your Mint Marks

Condition is not the only factor that goes into determining the value of a coin. Which particular mint a coin was made at also plays a role, which is why all coin investors should be up on their mint marks.

In the United States, for example, a "D" mint mark would indicate that a coin was created at the Denver, Colorado mint. An example of a coin whose value is strongly affected by the "D" mint mark is the 1950 Jefferson nickel. The 1950-D version of this coin is widely considered to be a key date and mark combination and therefore holds more value.

Balance Collector Value with Bullion Value

Rare coins have two types of value. The first is collector value, also known as numismatic value, which details the price a collector would be willing to pay for a coin given its rarity and condition. Underlying this, however, is the bullion value, or the value of the metal in the coin itself.

This value is, of course, greatest in gold coins. Though silver coins have bullion value, their collector value almost always outweighs this value by a significant amount. For this reason, coin investors should try to incorporate at least some gold into their coin collections.

Don't Rely Exclusively on Coins

As with any other type of investment, you should seek to diversify your portfolio, rather than relying on nothing but coins. Though coins have a strong tendency to maintain their value, they can fluctuate with collector trends and shifts in commodity values. Use coins as a part of a well-constructed portfolio that contains either other collector items or more traditional securities to balance your risk.

Coins can be worthwhile investments because of their mix of numismatic and bullion value. Their values often outpace inflation, allowing investors to profit from them over long periods of time. Incorporating coins into your portfolio will give you access to hard commodities that will withstand market pressures that could severely impact more traditional investments.