Denominating Your Wealth in U.S. Coins

The reason for buying coins are clear: inflation, compounded returns, and privacy. It is in your best interests, however, to engage in some research so that you can make intelligent purchase decisions and enjoy the thrill of the hunt. Consider the following when you examine the coin market. 


Why should I buy rare U.S. Gold Coins?






Purpose: Rare American coins have been one of the best wealth transfer tools for generations. Seldom has anything been conveyed that carries as much history and value as a top quality cabinet of rare gold coins. Over the long term, U.S. rare coins have always increased in value. This fundamental fact can be verified by an examination of their overall track record, dating back nearly 200 years. However, as with all markets, cycles clearly exist. The advent of reliable population and pricing data allows a profile to be developed and followed. It reveals a correlation to inflation and monetary growth. When inflation is perceived as a problem, the masses suddenly become coin "collectors," and, due to the nature of a fixed supply market, coin values soar. In the time span 1977-1980 the average coin realized gains of over 200% per year! Conversely, the periods of 1986-1992 saw prices retreat to 1980 levels. If your assets are such that your children or grandchildren, you must also consider what value these assets will have upon their transfer. If so, then indeed, rare coins could be for you!buy_gold_bullion.jpg

Common Sense: Throughout history, man has always been intrigued with the notion of possessing that which renders value - either initially, or at some later point in time. That philosophy of inherent value applies to that which is also pleasing to the eye. Coins, due to the laws of supply and demand, have always served as an object of value for many. The supply is fixed and the demand is growing. Collectively, these and many other motivations serve as the explanation for why people gravitate to coins of value. The Most rewarding aspect of numismatics involves the set completion of a particular type or style of coin. Over time, one may assemble the finest or most complete set of many coin types. A four piece 20th century set of gold coins can be completed within a month at a cost of about $3000.00 the 18th century gold set consists of three different gold coins. It would take 6-12 months to complete this set, a cost exceeding $25,000.00. Completing the series of three dollar gold coins from 1854-1889 is a worthwhile endeavor few can accomplish; it would take 5-15 years and hundreds of thousands of dollars to acquire the main pieces, and an undetermined period (and pocketbook!) to pry loose the few ultra-rarities. Such a set, however, would be worth far more than the sum of its parts, thus illustrating the wisdom of completing a full set. 

How Should I Buy Coins?


 

How much? First, one must establish what portion of one's investment funds are to be diverted. We recommend that investors divert 20-30% of their investment dollars into numismatics. 
How fast? The rate at which an investor builds a portfolio is strictly a personal matter. Many prefer to take advantage of current market prices by making a large initial investment in a portfolio of U.S. rare coins and keeping themselves on a steady accumulation program. 
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Spread: The purchase of rare coins should be done with the long-term future in mind because of the front end load that coins carry, although very common coins can be purchased on "tight spreads." The purchase of the average rare coin from SDL is analogous to buying an OTC stock that bids 1, asks 1 - 5/8. This spread includes acquisition cost, certification fees, postage, commissions, and, of course, a profit. 

Pricing: No one is giving away rarity and staying in business. We are no exception! We pride ourselves on selecting only coins that we would wish to reacquire in the future. Not all coins in a particular grade meet our high standards of aesthetic beauty. They must have "eye appeal" beyond their technical grade. When your purchase is complete your invoice will reveal individual coin prices. Compare them in publications such as the Coin Dealer Newsletter, The Red Book or Numismatic News to determine if the pricing is fair. 





When Should I Buy Coins?



Timing: Generally speaking, if interest rates have been rising steadily for a sustained period, rare coin purchases should be carefully considered. Historically, this economic climate has resulted in a high point for coin values and inflation. During 1988-92, however, inflation was all but forgotten. Many coins fell to ten year lows! Clearly, we see 1993-94 as a prime acquisition period. 
Gcoins.jpgLength of Hold: U.S. rare coins are long term investments - not overnight speculations. The longer you hold your coins the more appreciation you should see. One man, Mr Harold Bareford, bought coins in 1956 and died in 1979. His heirs traded in the coins in 1980 and realized an appreciation of over 8500%. Had the Bareford heirs held the coins until 1985, they would have realized an appreciation of almost 43,000% in 29 years! Investors must have strong hands and hold their investment portfolio a sufficient time to realize the highest returns possible. A short term or "panic" sell should be avoided in that it will always lead to a diminished return. Profits are seldom realized in the "short term." Instead, the tremendous gains you find reported are averaged over many years. 





Whom Should I Buy Coins From?


A Full - Service Dealer: Will take the time to educate you on the coin market, the quality of the coin and demand in the market; and would welcome your desire to learn as much as you want about this field. Any attempt to keep you away from books or other information, should be viewed with caution. They should have nothing to hide concerning your purchase. If your dealer does not offer credit card options for your purchase, be very cautious. Only a reputable dealer will receive credit card privileges for their clientele. Using a credit card serves numerous functions, including safeguarding against fraud, and providing permanent proof of purchase and tax records. 

Discount Dealers: Will buy and sell coins "sight unseen." The new electronic networks allow the trading of coins as long as they are independently graded and sealed. Money changes hands with no return privilege. This enables you to sell your coins using the same grade as you purchased them in. The discount dealer should only be used if your full service dealer has disappeared! Imagine this scenario: a full service dealer using research and diligence located a superb example of a particular coin and offers it to you. Itultimately_quaility_speaks.jpg has been certified as such and is exceptional for the grade. On the discount dealer's list it carries no additional value. It is the same as the last coin he saw, maybe even offer that same coin for less money but it will be on a sight unseen basis and could look much worse than your coin. 

Experience: Ask questions regarding length of time and location of business. If there is a vague or insufficient answer, consider another dealer to work with. There should be no hesitation as to the discussion of the length of time in business, unless there is something to hide. 

Member of Professional Organizations: If you are dealing with a reputable broker, he / she should be a member in good standing logo_ana.jpgof the American Numismatic Association. This is the closest thing to a regulatory body in this business. In addition, membership is personal so a bad broker can't hide behind a company membership, and a corporation can't fold and obtain a new membership. If your broker has experienced problems in the past, one phone call will reveal them. That affiliation will also serve as an arena for any arbitration or mediation, (if the need should arise), due to any complications in a given transaction. 

Dealer as Consultant: The dealer that you have selected must instill a sense of education an knowledge in the field so that you are comfortable with his recommendations. The dealer should certainly be abreast of the coin and relative dollar market and be able to advise you accordingly, serving your interests as well as his own. Remember to "buy in bad news and sell in good news" as a simple rule of thumb to begin with, and work from there. 

Liquidation: We are not brokers in the traditional sense. We do not make you wait for a buyer in order to sell your coins. We are direct purchasers of all American coins and stand ready to purchase any size collection. IN addition to recommending when to buy we will keep you abreast of all developments affecting your coins and also advise you when to sell. 

Authenticity and Grading: The rule here is never to allow any dealer to grade and authenticate his own coins...even us! He / She maycertified_ngc_proof_gold_2.5.jpg be the world's most honest person, but mistakes do happen. Ultimately, you are the only one who can police your coins' quality. If your dealer is not willing to submit your coins to an outside agency for grading and authentication it must mean he has his own doubts. If you don't check them out you will assume all is well and won't find out otherwise, until time to sell. Once a coin is graded, however, it has a known minimum value. In addition to supply and demand, a coin's value is determined by its condition. When a coin is graded, its state of preservation is assigned a Numerical expression from 1-70 (70 is the perfection and is never available at any price!). Once this grade is assigned, the coin is sealed in a plastic holder. However, some coins are so rare that they are unobtainable in top grade. Therefore, examples of coins known only in lower grades have made excellent investments. 

logo_ngc_115.jpgGrading (NGC Charter Member # 149): We have used the NGC (Numismatic Guaranty Corporation of America) for grading since they began their service in 1987. Unquestionably, NGC is the most conservative grading service in the business today. Moreover, their nonbiased approach is absolute and without exception. However, the coin market is somewhat speculative.