Collectibles and Law: Rarity one of many investment factors

By , Coin World
Published : 02/28/14
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The coin business, like most retail businesses in the United States, is generally described as being "unregulated."

This means that few, if any, federal, state or local regulations relate to the purchase and sale of coins. It also means that, in effect, no barriers block entry to the profession — anyone can put up a shingle (or a website) and start selling coins.

However, certain principles are in effect regarding what is and is not ethical when selling coins, particularly as investments, and a dealers application of these principles tells you whether or not the dealer is worthy of your business.

In this column I'll address how dealers discuss a coins rarity.

Rarity seems like a simple enough concept. All else being equal, scarcer collectible items are worth more than common ones.

But rarity is only one of many factors when looking at collectibles as an investment, the most important being the markets demand for the item now and at some future date when the investor might want to sell.

Are all "rare" coins valuable? Value depends upon why theyre rare and whether rarity matters for that particular type of coin.

Some items such as "colorized" or private commemorative coins are made in small numbers (often with individual serial numbers from the mint who produces them), but lack a secondary market that would support resale by investors.

Other items seem rare because of a relatively low mintage, but are actually sufficiently available to dealers and collectors who actually want them, so theres no pent-up demand that could increase their value over time. 

Then there are the "condition rarities," coins that may be common in lower grades but that appear in only a relatively small number in the highest grades in "population reports" by the major grading services.

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