For Beginning Coin Collectors:
Five Beginner's Mistakes and How To Correct Them
by Doug Winter Copyright © September 2001
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Almost every new collector makes mistakes, no matter what hobby he
participates in. After many years of working with collectors, there are a
number of common errors that I often see. Assuming that a collector is
truly interested in correcting them (some people continue to make these
basic mistakes, believing that they are "too smart" to receive
constructive criticism), most can be rectified with a combination of time,
money, patience, and the desire to learn to collect the "right"
Mistake #1: A new collector pays too much for coins.
"Paying too much" is a relative term. There is a big difference
between paying 5-10% too much for very nice, genuinely desirable coins and
paying 50% too much for poor quality, unpopular coins. In the first
instance, the passing of time will overcome a slight overpayment as will
the fact that truly nice coins always sell for a bit too much money. In
the second instance, the collector needs to learn how much nice coins
really sell for and where to buy them.
Determining the true market value for coins is not easy. Many
collectors (and even some dealers) feel that Greysheet bid or Coin World
Trends is the ultimate guide for coin pricing. These guides do not take a
number of factors into consideration. As an example, nice quality early
type coins generally sell for numbers well in excess of CDN
"bid." Conversely, certain gold issues, like high-priced San
Francisco half eagles, sell for large discounts relative to Trends.
Correction: Learn what the true market value for coins is. This
can be done by studying auction prices realized, looking at what dealers
are offering to sell (and buy) coins for and what other collectors you
know have paid for their coins. You should also learn which coins sell for
levels over published price guides and which sell for levels under these
Do not be afraid to stretch for truly rare and/or desirable coins. As
an example, if you pay 20% over Greysheet bid for a truly choice early
gold coin, the chances are good that this "stretch" will be
repaid when you go to sell your collection.
Mistake #2: A new collector buys his coins second (or even
third) hand. Many (if not most) new collectors buy coins from brokers. In
numismatics, a broker is defined as someone offering a coin for sale which
is not from his inventory. There is nothing wrong with coin brokers. But
often times buying coins from the dealer who owns them will save a
collector from 10 to 30%.
Correction: The solution for this problem is relatively easy.
Buy coins from the people who actually own them. Ask your dealer if he
owns the coin(s) he is offering you or if it is from other sources. As you
become more involved in numismatics, you'll learn how to see if the dealer
you ask this question to is telling you the truth. If, for example, he
cannot accurately describe a coin, the chances are good that he has not
seen it (and does not own it).
There are circumstances when it is acceptable to buy coins from a
dealer who does not own them. A dealer may act as your agent at an auction
and bid on coins that are not his. Or, a dealer might call you from a show
to let you know he's found a piece on your want list that is from another
dealer. In this case, there is nothing wrong in using the dealer as a
broker, provided his markup is reasonable. In such a transaction, a dealer
generally makes a small (5-10%) profit. Since he does not own the coin and
will have no downside risk in sending it to you on approval, he does not
merit as large a profit as if he owned the coin and had downside risk.
Mistake #3: A new collector decides he doesn't need a seasoned
professional to help him. Every week I speak with a new collector who
tells me how he has spent thousands (or even tens of thousands) of dollars
with no professional guidance. Unless he is remarkably lucky, the chances
are good that such a person has lost at least 50 cents on the dollar.
Buying rare coins is not easy. If you do not have someone to help you
pick the right coins at the right prices, you are likely to be taken
advantage of. The solution is easy: choose a reputable, knowledgeable
dealer and establish a good rapport with him.
Correction: Other than the small handful of truly expert
collectors who can compete with dealers, it is important to admit that you
need sound professional guidance. Few collectors have the time or ability
to become experts. It is not a sign of weakness to admit this.
How do you select the "right" dealer? The most important
factors to consider are the dealer's professional qualifications and
reputation. Choose someone who deals in the area you specialize in. Ask
for the names of some of his satisfied customers and speak with them about
the dealer. Once you have found the right dealer, reward him with your
loyalty. Speaking as a dealer, I can tell you it is hard for me to be
loyal to a client who has his want list out with six other dealers and who
mostly wants to pick my brain for free information.
Another qualification that, in my opinion, demonstrates the character
and level of professionalism that you should be looking for in a dealer
includes membership in the Professional Numismatists Guild (PNG). The 300+
members are the PNG represent the upper echelon of coin dealers and I
would suggest you stay away from any dealer who is not in this
Mistake #4: A new collector buys unencapsulated coins or
third-party graded coins from less-than-reputable services. With very few
exceptions, coins that have not been graded by PCGS or NGC are graded on a
standard that is too liberal. Many new collectors do not learn about the
pitfalls of buying non-PCGS or NGC coins until after they buy
"inferior" third-party graded coins. Not all second-tier
encapsulated coins are second rate. There are some that might only be a
point off. In such a case, I would suggest that these coins be removed
from their current holders and sent to NGC or PCGS.
Another mistake new collectors make is to buy expensive unencapsulated
coins. At this point in time, the market for encapsulated coins is so
pervasive that any item that is worth more than $500 but not in a PCGS or
NGC holder must be viewed with suspicion. Coin World is full of ads
offering seemingly remarkable values on "raw" coins. In my
experience, nearly all of these are either overgraded or, even worse,
cleaned, retoned or damaged.
Correction: Again, the solution to this problem is relatively
easy. Buy coins that have been graded by PCGS and/or NGC and avoid coins
graded by other "second tier" services. Purchasing
unencapsulated coins, whether through advertisements or auction sales, is
best left to experts. If you see raw coins listed in auction catalogs that
are of interest, have a reputable dealer view them for you. If this dealer
likes the coin, hire him as your agent.
Mistake #5: A new collector does not take time to learn about
coins and the coin market. I have long believed that in numismatics,
education is a collector's number one ally. It never ceases to amaze me
how many collectors will spend tens of thousands of dollars on coins but
not one cent on coin books. At this point in time, there is more good
information available to collectors than at any other time in numismatic
history. There are well-written guidebooks on almost every major series of
American coin and there are dozens of excellent educational websites on
the Internet that provide unbiased information. If you have already spent
a considerable sum of money on coins but do not own any coin books, spend
$500 on a basic library of general and specialized books.
Correction: Buy a core group of coins books and, more
importantly, read them. If you collect gold coins, you should buy my
series of books on branch mint issues. If you collect other types of
coins, there are many good books available and I would be happy to suggest
them to you. For pricing information, I would suggest you refer to Coin
World Trends Online (www.coinworld.com).
For rarity information, the PCGS Online Population Report is an excellent
For excellent photos and information on all United States issues, try www.coinresource.com
All beginning collectors make mistakes. Some of these mistakes are
costly, some are not. Hopefully, reading this article will make new
collectors step back and analyze their numismatic behavior. If you are
making one (or more) of these mistakes, do not despair. Instead, think
what you can do to correct them and move forward.
If you have any questions or comments regarding the points made in this
article, please feel free to contact me via email at email@example.com.
Provided courtesy: www.raregoldcoins.com.
This site is a Gold Coin site and among the best on the internet.