Do you have rules for whether or not you upgrade a coin? If so, share them. What I generally do for my sets: If the coin is < $100, I will generally do a 1 pt upgrade as long as it's also an improvement in eye appeal. For anything more expensive: For gold, I'd upgrade a 60/61 to a 62, anything higher, I'll generally do a 1pt upgrade if the eye appeal is significantly better. I think for gold, even a 1 pt upgrade can be a big improvement in eye appeal. For silver, I generally upgrade to 63, 65, and 67. Any other grades I consider if there's a big improvement in eye appeal, or if the coin is otherwise very rare and an intermediate grade is likely top pop. For base metals, I will generally upgrade to a 65, and anything else is based on eye appeal and rarity.
The number on the holder only sets the price. Finding premium coins in lower-grade holders will get you the most bang for your buck, as well as make you more selective and less spendthrifty about what you put in. I really dislike such rigid methodologies for building my collection. I strive to get a suitable coin the first time so I don’t have to constantly worry about upgrading it in the future. If I happen to find one later that I like better, then I buy it and sell the other. EZPZ. But if you are constraining yourself to a specific set of modern coins whose main significance is the number on the label, then I guess such a regimented approach is required. Not my cup of tea.
I'm not currently working on any graded sets, so the upgrade option has not been something to think about lately. When I had a Proof Franklin collection, I started with generic coins and eventually upgraded to Cameo/DCAM examples as I delved deeper into the series. I do have a raw Dansco Type Set and I have upgraded some coins there. The process is simple: if I find a more eye-appealing coin at a reasonable price (to me) and I'm not yet fully satisfied with the current example, then I will upgrade. In general, I agree with @TypeCoin971793 that finding the right coin the first time around is often the most economical method. The only time I'd consider picking up a coin to upgrade later is if the price is low enough (where it will be relatively easy to sell when an upgrade comes along...note: this can still be risky as the market can always turn on that coin) or if it is something rare (where you can't be certain that an upgrade will show up).
The only rule I have is that an upgrade should be plainly obvious at first sight as an upgrade. If the difference is only incremental and really hard to spot, then it's not really an upgrade, but rather a second coin of the same type. Here's what I'd call an obvious upgrade... VS. Since none of my ancient coins are slabbed, things like MS-63 vs MS-64 are irrelevant.
No hard and fast rules for upgrading. I replace a coin in my collection if I like another one better, even if it may be at the same or lower grade.
I'm talking about the grades of the coins to the collector, not what's on a label. All the coins in my main sets do eventually get slabbed. I buy the lion share of my coins raw though. For those I buy slabbed, I don't always agree with the grade, and frequently I will cross or resubmit a coin fully expecting a downgrade. If it's a coin I feel will be in my collection long term and I have no plans to sell it, I would rather the grade on the slab be one I agree with. All purchases I evaluate according to my upgrade rules, however, since the probable grade it will get when slabbed is important to me. Finding the right coin the first time around is always the best way to do it, but it's frequently not possible. For some of the coins in my sets, I have MS60/61s that don't have great eye appeal, but it may have been the only example I saw for sale in a decade, or it may have been an absolute bargain that I jumped at. I also find most of the time I upgrade a coin, I can recover what I paid for the upgraded coin when I go to sell it. In some cases, I wind up selling the upgraded coin for more than I paid to upgrade it. I'd have to look through my records to prove this, but while I don't make money on every upgrade, I would be extremely surprised if I wasn't in the black overall on upgrades. Aside from upgrades being generally cash positive, the other reason why I pursue them is that I fill perhaps one or two holes at best in my main set each year at this point. Upgrades keep the excitement up of working on the set. There's nothing like the feeling of finally finding that special upgrade that you know you're never going to top though.
