Market Blog - Written by Doug Winter on Thursday, June 30, 2011 10:56 - 9 Comments
The Two Types of Coin Collectors
In my day-to-day dealings with collectors, I note at least two distinct typologies. First, there is the collector who has either been buying coins since he was a child, or who was a collector as a kid and has since rekindled his early romance with numismatics. And then there is the newcomer who is generally introduced to coins through precious metals/bullion/modern coins.
The lifetime collector versus the precious metals advocate. Which is “better?”
My answer to this question is simple: neither is “better.” And I think both schools can learn a little something about coins and the coin hobby from each other.
Whether you choose to admit it or not, financial considerations should enter into every transaction that you the collector makes. A true collector might not worry about paying an irrational amount of money for a much-coveted coin, but every purchase should be considered for its long-term implications. I’ve seen dealers write comments to the effect that “it doesn’t matter what you pay for a great coin; the market always takes care of high-quality purchases.” I think this is a self-serving comment and I think that price considerations are, in virtually all cases, important.
In other words, the dyed-in-the-wool collector sometimes needs to think more like an investor and consider what the upside and downside is for his purchases.
Since the 1980′s and the era of coin telemarketing, many people have been introduced to numismatics by a simple three step process: 1) buy gold, usually in the form of bullion, 2) be converted or up-sold to semi-numismatics, usually in the form of St. Gaudens double eagles or, lately, Proof American eagles, and 3) become interested in rare coins and start a collection (or a random assortment) of numismatic coins.
Given their backgrounds as investors, these individuals need to think a bit more like collectors.
It’s kind of a cliche, at this point, to write this but in my long years of experience in numismatics, the collectors that I see who are the most successful are a hybrid of collector and investor. And the ones that are the most unsuccessful are the ones who approach numismatics strictly as an investment.
Any sort of hobby, whether its crochet, yoga, or coin collecting, is made more enjoyable when it is approached with passion. In the case of numismatics, this means learning about coins, learning about the market, and becoming familiar with the buying and selling process. Coin buyers who see nothing more than market cycles and who study the CU3000 index more than the latest auction catalog and not going to get the fulfillment (emotionally or financially) that the old-school collector derives from his coins.
One of the great things about today’s world is the accessibility to information that we all have. If I were writing this same blog ten years ago, it would be hard for me to tell an investor to go online and read a lot about rare coins to become a more confident buyer. Today, there is a tremendous amount of information available.
What can the investor do to orient himself more like a collector? Obviously, the first answer is to do as much due diligence as possible. Read. Learn about the market. Choose a reputable dealer. Become a specialist. Become as familiar as possible with the concept of eye appeal and comfortable with the basics of grading.
What can the collector do to think more like an investor? Learn not to make purchasing decisions based entirely on emotions and learn the concept of buying and holding. Study the ups and downs of the coin market and learn to buy at the bottom or middle of the cycle and not at the top. Become aware of who to buy the best coins from at the most reasonable prices.
I find that as the years pass, the pure collector becomes more of a collector-investor and the pure investor becomes more of an investor-collector. Ultimately, the “twain does meet” (sort of) and these two types have more common ground that you might actually believe.
9 Comments
Doug, excellent article. I believe the factor which is most important is also perhaps the most difficult – establishing “the right” relationships. Without proper guidance both the collector and the investor are at a distinct disadvantage. And I believe there are far fewer qualified and honest mentors/dealers than most realize.
Doug, You nailed exactly how I went from investor to collector to specialist! Great advice. JL
Similar to Martin’s comment, dealers who have honest and forthright dealings with collectors / investors, tend to have the customer connection edge that allows them to have a first shot at selling / buying numismatic items. The results tend to be fruitful for both only if product is available. In some cases, however, the “right” coin at exhorbitant prices is available only through unscrupulous dealers. Therefore more time is required to fulfill collections. That is the paradox which makes things difficult. Thanks for an excellent article and topic.
Thanks, again, Doug for your years of experience and insight.. We have many choices today where we buy and sell our coins– very unlike the days of yesteryear when a local dealer was our only outlet.
SELLING
To all who have never or seldom sold your coins, either on memo to a recognized dealer, or in auction, do your homework here to the same extent when you bought the the rare gold or high end silver that you thought you would keep forever. This appears to be an area that many collectors do not have much experience doing.Talk to all the auction companies, and the dealers/collectors for whom you have the most respect, as there are little things you would have never considered.
You might decide to consign the entire set to a single dealer( Doug has taken in many sets of his specialty, and has obtained better prices than auction sales), Or if there is really something special about a rare high end piece, it may require a big sale to get all the attention it deserves.
Sell your no longer wanted or needed coins at very reasonable( even low) prices. Most are not ever going to be profitable.
Set a reserve, or go without– a tough decision depending on market conditions, and the specific coins involved. Get help and do not rely on just what the auction company tells you.
BUYING
Until you have 20 or more years experience, get second or third opinions. On both grade and price. I have stepped way up, or completely avoided some purchases based on what my closest friends/experts have advised me..And do not rely on online website/auction images. Except for a start. Very few coins can be accurately graded from an image only.
Most truly rare coins will advance in value over time– but the time may be 20 plus years to obtain the best price. Is now the time to sell? Depends greatly on the market conditions, and only the full time dealers know this well.
I wish all dealers were as concerned about the coins they sell as Mr. Winter.
Great advice Doug. Let me add something from my experience as a collector/investor since 1954–and which took me many years to learn: There is no Santa Claus for rare coins. I spent many years buying and selling mediocre “bargain” coins and while I had fun, never turned much of a profit. About 10 years back I saw the light and since buy QUALITY- eye-appeal coins only. Coins that you never have to apologivze for. Pay MARKET price, or over for PQ. And of course, always buy CERTIFIED. How do I know this works? 5 years ago I sold a collection through a major auction house–97% sell rate and over 50% profit on coins most of which I had owned for 2-5 years.
Buy right, you can sell right. Find a dealer that’s a real squib on his buying end, and you should be able to get the best deal on his sell end, product-for-product equal.
Martin Kaplan - Jun 30, 2011 04:59 pm