Determining the Right Grade to Buy for Investor Value.

Here's a post that I just have to do.

I am a currency market teacher (formally trader) along with being a coin and bullion hobbyist and I know for a fact that if you're not getting a coin/grade that is liquid in terms of it's price and value fluctuations, you're just gonna keep that coin for looks.

This is my discovery.

Buy coins that are volatile in price movements. Track it's lowest price and try to buy at that.

Figure this, if you buy an 1885-cc morgan ms63 and you pay $600 for it like me.. In fifty years, will the value really jump up? Chances are it won't. The coin has been out for over 100+ years and $600 is it's worth in ms63. Why would you want to buy that coin at that grade if that's the return you'll probably yield in another 50-100 years. An MS65 however just might.

I've learned like some have suggested, to buy coins in high grades that actually have high value in the market. Nothing beats buying the best, but it's affordability that could be the problem for most.

There still are deals out there that I believe you can get for a good price and wait 5-10 years and make a $200-300 profit. not bad, could be better but it's better than holding on a no yield coin.

Right?

This is all through investment perspective.. Of course let's not forget the beauty of the coin as well for our own personal sake.

 

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Hopefully in 6 months I'll have learned a thing or two about coin grading to share

 

I think your missing one of the rather important factors in coin investing. It is basically the same as with many hobbiest items. Or similar to an Oil Painting. LIQUIDITY. Ever watch the Antique Road Show? Listen carefully as they say things like "At the right auction, this would be worth xxxx" or "At a Leather Chair with no springs aution, this would be worth xxxx".
Of course you never hear of how many have tried to sell thier objects for those fantastic prices. The reason is some of the so called special autions probably come up once every thousand years. :headbang:
This is my point with coins. You can buy a coin that should sell for a thousand, but if you can not find a buyer, guess what? You can almost always find someone to buy a $0.50 valued coin but how many people are buying a coin worth thousands? You could buy a coin graded as MS-70 but if no one wants it, so what. It's not grade for investing, it's ability to resell it.

 

My answer probably won't be satisfactory to you or most others. I think the better return will come from lower grade coins that are truly scarce and not scarce for the grade. So if two coins are both selling for $600 [assuming it is a fair price for both], and one is MS63 and the other is VF, I would choose the VF for return possibilities. Real scarcity beats conditional scarcity in my book.

Regarding your theory, I don't think the coin market is liquid enough, or the coins identical enough to track price volitility in the manner you describe. Coins as investments have more in common with real estate investments than currencies or stocks. Coins at identical grades can sell for different prices on the same day because of things like eye appear and other intangibles.

 

There are several factors which are as or more important than buying the "right grade". Among them are:

Buying solid and/or eye/appealing coins for whatever grade you acquire - that means if you try to buy coins too cheaply, you will probably end up with sub-par coins.

Buying at the right time.

Not over-paying - and that's even if the coins really are of nice quality and/or eye-appealing for the assigned grade.

Selling at the right time.

Selling through the right venue.

 

BnB did you know there are almost as many MS65 PCGS graded 85 CC's as MS63's? 3600 vs. 3900. In MS64 there are about 6400. I am sure a percentage is cracked out but even if it is 30% that still leaves about 10,000 graded in those 3 grades. Also nearly all are graded as MS60 or higher.

Other coins like the 89 CC are nearly all graded under MS60 [95%].

i think you need to study the pops of the coins more and also you are right about the maturity of a coin series. It does matter as you are buying in now after the coins have appreciated for many years. If you had gotten these 50 years ago when they sold for $15 each that may have been the time for better appreciation.

I still think they will do well, just not what they have done perhaps, but that is only a guess.

 

I understand what you want to do. It can be done obviously because there are many dealers in the coin business. But, until you learn a lot more than you do I am afraid you are going to get "burned" on coin purchases for resale.

If it was that easy there would be a lot of rich people here on Coin Talk. I wish you good luck, but I'll repeat something I have said to you before. Make sure you only buy coins you like because you may be hanging on to them for awhile.

 

Another consideration is the effect or sway that numismatic opinion has and will have on the valuation of coins.

The coin marketplace has greatly changed in the past 10 years (Internet). I don't have any evidence, but I'm guessing numismatic opinion has less sway than it did 30 years ago.

I don't think anyone would deny there are more and more people like the OP who are looking at pop reports, gray sheets, trends, etc. to buy their next coin.

I'm not knocking that - just saying it's the reality.

 

First buy coins that are truley rare and have a solid track record of being wanted , don't skimp and buy a coin because it's cheap , chances are it's cheap for a reason , eye apeal sells , also you should be able to buy coins somewhere between ask and bid , to do this you must be a dealer or at least pay the fees to be able to put in buy and bid quotes .
rzage

 

David Bowers wrote a book on this topic years ago. Much of it falls right in line with what Mark posted above. Great looking coins (for the grade) and held long term do well if sold at the right time and place. I'm sure that same money could have done better in a different type of investment but that can't be as much fun. The tough part is watching the cycle everything seems to have and selling at the right time.

 

Here's a piece of advice.....if you are wanting to buy coins for investments, just take a look at my albums and don't buy what I have! Chance are that you will actually make some money doing the opposite! LOL!

 

That is the same thing I say to the people at work on the stock market...if I own it don't buy it...

Personally I do not recommend using coin as an investment. Maybe some bullion, but very little. Good luck!

 

Mark, what stocks do you invest in, I will be sure to stay away! LOL! >>>>>

 

BNB--
Not sure I'm saying anything differently here, but trying to transfer trading skills from other venues, like stocks, currency, options etc. to the numismatic field is suspect at best. Coins are not commodities, even if they are slabbed.

Just try to find a niche you enjoy and can learn in and then pay attention to the people (including many on here) that are bound to know a lot more than you or me and enjoy the ride. If in the end, you make a little money, all the better.

 

That's exactly right BNB, every coin is unique and that's why you can't rely just on a price guide to value it. You've already seen since you've owned 3 MS65 '85-CC Morgans that not all of them are equal, and neither should their price be equal. That's why all of the prices in the Bluesheet (used to buy sight-unseen slabbed coins) are so ridiculously low as the prices practically assume that the coin will be the worst possible for the grade. Unless you are lucky, if you're buying at a low end price for the grade, you'll end up with a low end coin for the grade.

From what the old time dealers have told me, investors tried to get into coins pretty big in the 1980s and they failed big time because they were buying based on the grade on the holder and not on the coin itself. So the investors ended up with a bunch of bad for the grade coins that upon sale didn't realize nearly the cash that the investors though they were worth.

 

I read where the bankers are now forming derivative financial instruments from life insurance policies. The can sell these derivatives value based on the lifespan and payout of the policies. If you have a fully paid policy, they will buy it from you at a discount, package it with others, sell it and when you die, someone else celebrates.

Doesn't this sound like the mortgage derivatives that brought financials to their knees? Numismatic derivatives can't be too far behind. I keep think that the registry programs are well suited for forming such.

Jim

 

Whoever starts this first will make a lot of money regardless of whether or not it's a sound idea, so some of the folks here who are full-time in the coin business had better get busy!!!

 

I get what you're saying but there is not much wrong with studying the grades's price movements in the past and buying a nice coin according to that grade.. Sometimes I'd think an MS65 would be more valuable than an MS66 for whatever reason.

 

Only if the MS65 is a better quality and/or more appealing looking coin than the MS66.