7 lessons in collecting: Invest in education
- Published: Dec 19, 2014, 7 AM
How does someone successfully invest in rare coins? To answer that question, one has to first define what success is. Is it just monetary returns, or is success measured by something larger?
Do you want to put together a meaningful collection or just beat standard stock indexes? Do you want to have fun while putting together a collection and learn about the history of numismatics, or are you content to let others do the work for you?
Skills you can build on
Investing in rare coins is not easy. It takes dedication to learn various aspects of coin collecting that are always changing: supply, demand, rarity, grading, and understanding how to maximize value when buying and selling. These are skills that take years, if not a lifetime, to master.
Thankfully plenty of helpful resources exist in the coin field to help collectors willing to put in the legwork to maximize the investment return on their collection, including a new book by Robert W. Shippee recently published by Whitman, titled Pleasure and Profit. In it, Shippee discusses his pursuit over the course of more than a decade to put together a type set of each major design type from copper half cents to gold $20 double eagles, from 1793 to the present day. It’s a frank, candid tome filled with anecdotes that collectors can learn from.
In reading this book, some themes prevailed and specific coins are used to illustrate these. The book provides a rare opportunity to get inside a collector’s head. Some coins were winners in terms of profit, others were losers, but the collection overall was a success. According to Shippee’s calculation, the collection — which he called the Waccabuc Collection after a location in New York — sold for $1,405,136 at a Nov. 13, 2007, Stack’s auction. Shippee calculated that the 138-lot sale represented a gain of 39.4 percent over his initial purchase price (or a compound return of 10.2 percent annually over the holding period).
Lesson No 1: Invest in education first
In the foreword to the book, hobby legend Q. David Bowers writes, “Building a working library is considered ideal by many coin buyers, but reality is that only a small percentage do so.” He adds, “It is curious that, say, $1,000 to $2,000 spent on a shelf of useful books will repay its cost many times over, but most buyers would rather spend the money, and quickly, on a $1,000 or $2,000 coin. Knowledge is the key to success.”
Learning about coins gives a buyer a distinct advantage, Shippee wrote. “Beginning almost 20 years ago, I began to get serious about building a meaningful coin collection. I started going to auctions, buying coins, and buying books (sadly, in that order). I didn’t yet have a grand vision of what kind of collection I wanted to build.” Reading and learning helped him refine his eye, taught him the stories behind the items that he was purchasing, and helped him understand relative rarity, both of a coin within a given series and of a coin’s rarity in broader terms.
Education as a first step will help a collector narrow a focus, and Shippee suggests that an easy way to get inspired is to flip through the pages of A Guide Book of United States Coins (better known as the “Red Book”) since, “one of the great joys of coin collecting is that there are no rules telling you what to collect. The possibilities are almost endless, and there is no right or wrong way.”
Shippee picked a type set — where a collector acquires a single coin representing a design type — after experimenting with a few different series including gold $3 coins and Trade dollars.
For him, a type set represented opportunity: “Every item in a dealer’s inventory might be the right piece for your type collection, and every page of an auction catalog offers an opportunity to fill a hole in your collection or improve upon one of the coins you already own. Every specialist book and numismatic article has some relevance when you’re trying to complete a type collection.”
Educating yourself on how coins were struck is a smart investment in one’s time and energy.
It may cost a little more to buy a well-struck example of a type that is typically weak, but by being selective, you can own coins that will appeal to more discerning buyers.
More from the "7 lessons in collecting" series:
- Lesson No. 1: Invest in education first
- Lesson No. 2: Understand that mistakes happen
- Lesson No. 3: Learn how to grade coins
- Lessong No. 4: Quality and rarity don't go out of style
- Lesson No. 5: Understand supply and demand to find value
- Lesson No. 6: Look for special coins and stretch for them
- Lesson No. 7: Understand how to work with dealers
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