A philosophy for rare coin investing

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By Bruce Smith, Senior Portfolio Director and Numismatic Writer at Blanchard and Company

One of the first symbolic, political, and critical economic actions to announce the independence of the newly forming American Colonies was the coining of monies. Investors should embrace these historically significant symbols of the American story when investing in rare coins. More than paper or a certificate, and more than just money to be handed down to the next of kin, these are investments with meaning, virtue, history and passion.

This begs the important question: How do I go about investing money, hard-earned money, in this market?

After two decades of handling portfolios both large and small, I am convinced that several critical principles must be embraced to achieve success.

From coins that cost as little as several hundred dollars apiece to those into the millions, the clients who have prospered the most are those that have implemented the principles shared in following paragraphs. Regardless of ones budget, applying these principles can help deliver handsome rewards.

Investors should always focus on quality over quantity. Many investors come to the rare arena thinking they need to acquire as much bulk as possible that owning many lower priced gold coins is better than placing the same amount of capital into a smaller number of truly rare coins. This is not the case, and the principle is true in any collector market. The rarest art, cars, watches, and historical artifacts are always the ones that are most coveted and the ones that appreciate most substantially. Translate this over into the rare coin arena, and investors should focus on the quality coins that will be sought after by the entire market.

Invest in the rarest coin a budget will allow, and acquire the coins with the lowest populations, the greatest allure, and the biggest story. Acquire the coins that others will compete for when it is time for you to sell.

In the stock market, blue chips are those stocks that have been around for a long time and have historically given strong returns to investors. The rare coin market has its blue chips as well. Blue chip rarities are those sectors of coins that have been very strong producers of investment return over the long-term. These are the various segments of the blue chip market where collectors and investors should put their focus:

Key Date Gold/Key Date Coins
These coins have smaller populations, strong investor sentiment, are important parts of set-building strategies and have great history behind them. Mintages for key dates vary from year to year depending upon certain political, economic, or historical realities, but their demand rarely wanes. Coins become key date through time and circumstance, becoming rare and desirable by comparison to other more common coins.

Early Date Gold: Coins Minted Prior to 1838
These coins are magic. They are full of the history of Americas founding, its patriarchs, and the American ideal. As such, and because they are exceedingly rare especially those dated prior to 1800 these coins are sought after by all savvy investors. Early date gold coins also are very tough to acquire, and when they do appear, they can trade in the moment regardless of the price. Early date silver is also very desirable and extraordinary. Many of these remarkable early silver coins, aesthetically speaking, capture the imagination and hearken back to the early American period unlike any other coins.

Proof Gold
These coins were minted for collectors and have mirror-like finishes that are absolutely breathtaking. Japanese investors have been in the states in recent years acquiring these coins rabidly. Many seasoned investors build entire portfolios of proof coinage. They are truly mesmerizing to view, and the populations are minuscule. In many cases only handfuls were minted. Struck by highly polished dies with precise requirements in place, many were only given to dignitaries. The famous $4.00 Stella coin is one great example.

The Civil War
Talk about history! Has there been another moment in American history that has captivated authors, storytellers, and movie makers more? Because of their history, low survivability, and collector fervor, these coins are a very sought after segment of the market. A rare and exceptional niche would be Civil War proof coinage, which is one of the more coveted sectors of all coinage.

Gold Rush Gold
One could be argued that the American West and the American economy really got their starts on the back of this epic American saga. From the fields of the Gold Rush grew the American spirit of adventure, enterprise, and entrepreneurship. Due to the relatively small number of coins, the history, and the ability to build sets from this period, this is another very strong arena for collectors and investors to explore. Territorial pieces from important sanctioned assay offices make up one of the more interesting sectors for many investors, and some collectors have focused exclusively on this segment.

Branch Mint Gold
Coins minted at mints other than Philadelphia and Denver. The coins to pursue in this category were minted in Dahlonega, Ga., Charlotte, N.C., San Francisco, Calif., and New Orleans, La. These mints generally produced fewer coins and operated for shorter periods of time. Consequently, the rarity factor really favors these specimens, and collectors cannot get enough of them. Typically, the scarcest of these coins are from Charlotte and Dahlonega, but again, it depends on the date, type, and variety. In recent years the New Orleans mint has become a hot market as investors and collectors have gained greater knowledge of coins like the 1838-O half dollar and other rarities.

Pedigree Coins
These are coins with a historically important lineage or story. To own a coin that was previously owned by a famous collector is important to many investors because they realize this history lends itself to a greater potential value. A coin once owned by a king, for example, will have more appeal than the same coin without that pedigree. Some of the pedigrees to look for are: King Farouk, King of Siam, Eliasberg, Trompeter, Norweb, Garrett, Elrod, Reed, Pittman, and Bass. Further, pedigrees can help establish the authenticity of big-dollar coins.

An investor considering a major six- or seven-figure purchase will find great assurance from the evaluation of a coins trading history and important lineage.

Marquis Coins
This is the really exciting stuff. These are the coins that get most of the press. These are the most aggressive of the blue chips. This is where the big boys play. This sector is not for the average investor, and the returns historically havent been average either. These are the Picasso coins, the Rembrandts. In the rare coin market, this is where the big thrills exist.

James F. Byrnes wrote, Too many people are thinking of security instead of opportunity. They seem more afraid of life than death. To really live in the rare coin market, this is the sector to pursue. In fact, many of these coins were owned by the infamous King of Egypt, King Farouk (1933 St. Gaudens Gold Double Eagle, 1913 Liberty Nickel, and the 1804 Silver Dollar), and others by the King of Siam.

The blue chip coins do not wait for the timid investor. They are rare, they are sought after, and they trade quickly. Moreover, in an environment in which the market is doing well and values are climbing, the fever is greater for the real rarities. Do not assume the rest of the market will wait for a collector to make a decision on a truly rare coin. With coins of great rarity its a matter of availability. If the coin you need comes available, have the confidence in your strategy to make the move. Otherwise, you will in all likelihood have to pay more when and if the next opportunity for the same coin arises.