Are Uncirculated Coins a Good Investment?

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Although collecting rare and valuable items of any sort is often seen as a hobby, many financially shrewd individuals have found ways to turn a pastime into a lucrative side job. Uncirculated coins, which are coins graded at a level that indicates that they are almost in mint condition, are highly sought after in the coin-collecting world for their quality of condition. Those investing in uncirculated coins can hope to earn slight returns on their investment if they have a passing knowledge of how to manage their coin investments.

Modest Returns

As an investment product, uncirculated coins represent a commodity in which people can invest. Unlike other securities that are based on business performance, such as stocks, commodity investing relies on various attributes of the commodity itself, such as rarity or quality of condition. The only way for an investment on uncirculated coins to improve is if those attributes become more valuable to collectors, which hinges on a coin's availability and age. An investment portfolio consisting of uncirculated coins could see returns ranging from five percent to 15 percent, a small portion of the entire portfolio.

Risks

The commodity investment market in which uncirculated coins are bought and sold is not regulated in the same way as other investments, such as bonds and different classes of stock. The risk of purchasing counterfeit products that have no value to collectors is much higher because of this. Unscrupulous grading services can also overstate the condition of a particular coin, allowing a dealer to sell a coin for greater than its worth.

Coin Grading

One way many uncirculated coin investors protect their investment is by grading their more valuable coins against a standard scale adopted by the American Numismatic Association, or ANA. This both preserves the coin and rates its condition and quality Grades range from P-1, which is poor, to MS-70, which is mint state. Any coin graded at MS-60 or above is considered to be "uncirculated." Even when truly uncirculated, a coin still experiences wear during the minting process, which normally causes its condition to be slightly less than perfect.

Market prices for graded coins increase exponentially with the grade issued. For example, a coin might be worth $450 graded at MS-60, $700 at MS-63, and $1,600 at MS-65.

Selling Coins

In the end, the investment value of uncirculated coins is dependent on the performance of the collector's market. Information on market trends and basic pricing guides can be found in magazines catering to the coin collecting industry, such as "Coin World" or "Numismatic News." Coin collectors can find buyers for their uncirculated coins through Internet auctions, including eBay, and local collecting shops or antique dealers. More serious investors owning valuable uncirculated coins may also be able to find interested buyers by attending coin shows or local coin clubs.

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