The question repeatedly arises whether a new entrant to the world of U.S. rare coins should operate strictly as a collector enjoying an age-old hobby deeply enriched with history, or should he or she approach this tangible asset strictly as an investor seeking reasonable annual appreciation on an investment.  I think many dealers in U.S. rare coins shun the thought of investment returns being a primary goal of an acquirer of truly rare U.S. coins since they do not want to assume the potential liability of the client not making a profit or actually losing money when they decide to sell.  Furthermore, very few coin dealers are familiar with U.S. securities regulations at the Federal and State levels pertaining to investment recommendations to consumers.  So the path of least resistance is to avoid any treatment of numismatics that analyses past versus recent price performances, and compares true rarity both from population reports and direct market experience to existing prices levels for any specific coin.  This perpetual question of hobby versus investment will persist forever in my view, but there are many arguments why the most productive approach incorporates key elements of both approaches.  The two goals of completing a collection or a numismatic goal, and making money in the process are not mutually exclusive.  And for very practical reasons also.

If the average liquid assets of us middle-aged baby boomers is in the $300,000 area, which statistics support, excluding real estate and including 401k plans, then a registered investment advisor would recommend no more than 10% to 15% of total liquid assets be allocated to tangible assets such as U.S. rare coins.  And don't consider retirement plans as unavailable for spending or illiquid!  Americans, unfortunately, are borrowing from these retirement accounts in increasing frequency and amounts.  This would equate to a $30,000 to $45,000 total dollar commitment on behalf of the consumer.  Now this rule-of-thumb would not necessarily apply to a pure collector, but a prudent person, and this is the viewpoint taken in all regulated markets, would still apply a pre-determined limit on his or her exposure to any given area of expenditure.  Of course, we are not referring to the Bill Gates or Tiger Woods class of individuals where money is no object.  We are referring to the average participant.  I am using Baby Boomers only as an example, but regardless of our infamy and future crushing burden on Social Security, we command purchasing power as a demographic group that probably will have the greatest effect on U.S. rare coin prices for many years to come.  Just the facts, M'am.

So when the purists suggest or demand that you should only approach numismatics as a collector and not as an investor, there is a little bit of high-priced snobbery or elitism going on.  Thirty Thousand Smackers Plus is no drop in the bucket, and no matter how excited you are about picking up that last bobble for your collection or set, you as an Average Man (politically correct: "Person") have to be accountable to someone for the total chips you have put on the table.  If it is not to your spouse or heirs, it could be to the endowment you may be leaving for your church or university.  Scarce resources such as dollars, and liquid ones at that, must be treated accordingly.

Now I hate to be the one to say it, but part of the reason some coin dealers consistently take this "Collector Only" stance is that their margins and pricing may not allow you to make a profit on the coin they just sold you anytime soon.  If their markups over what you, the Average Man or Person, could readily sell the coin for the next minute after purchase is the likely 30% plus so common today, it could be four years before you get into the black.  And this assumes a rising rare coin market.  You are a much happier customer vis a vis this dealer when you are thinking strictly as a collector and future price does not matter in relation to the intrinsic value of the piece.  We're talking value to you and no one else.  However, I find it hard to believe that anyone with the discipline and resources to acquire a "collector" rare coin in the first place is not someone very conscious of what he or she pays for the item and what the next owner will pay for the privilege of ownership.  I would like to think that we coin enthusiasts, no matter what our motivation, are above-average intellects.  Or am I being elitist now?

As a collector only, won't you be more productive and acquire a finer collection if you employ some of the disciplines of an investor?!  Once again, remember that we have limited, not unlimited resources to pursue our goals.  By studying the last 10 to 20 years of price behavior of a given type and series of U.S. rare coin, you have the leverage through knowledge not to overpay for any given acquisition.  Now of course this argument also assumes that you are not buying an overgraded coin, but LET'S NOT GO THERE!!!  And by not overpaying, you at least have a better than 50% chance of upgrading individual pieces in your collection by selling those less rare coins for even finer examples.  You are using price appreciation to increase your acquisition power, and increasingly rare and well-preserved coins require increased expenditures.  Find a coin dealer that will tell you otherwise!  Unless of course you have a Cherry Pickers trained eye to crack out a coin and obtain a value boosting upgrade on a consistent basis.  But once again, you are the Average Man, no offense meant.  

Heaven forbid, chart the CDN bid prices for any rare coin or series you currently collect or plan to collect (or invest in!), and observe the price pattern and behavior as you would a stock or equity mutual fund.  Don't forget that these latter asset classes comprised of paper promises currently aren't setting the world on fire (except in the Crash and Burn Mode), and you want to avoid mimicking their recent behavior.  An asset is an asset is an asset.  Markets operate differently in their efficiency and pricing mechanisms, but buyers and sellers are guided by the same human emotions that designed a wheel in a cave.  A thorough study of history shows that human psychology has changed little in over two thousand years.  Never forget this when you spend your hard earned money.  Increased demand with constant supply will always, in a free market, lead to increased prices.

Why the Coin Dealer Newsletter (or competitors) has not joined the New Millennium and packaged their databases of U.S. rare coins for sale in CD format is beyond me.  Loading a specific series of coins into a spreadsheet program would then be a snap, and you would have analytical information at your fingertips for assisting you in negotiating an acquisition or sale.  I currently track my favorite series by manually inputting the weekly and monthly and quarterly CDN data, but I would rather go fishing.  What a duplication of effort!   However, the resultant information is well worth the effort.  Many dealers will tell you that this data is more retail than wholesale, and that the methodology and discipline involved in its collection is flawed, but we are trying to find relative value here based on price trends, not necessarily absolute value.  There are too many variables between say 1882-O Morgan DMPL's in MS65 to suggest there is one price for all of these rarities preserved at this level.

The price is only as accurate as that for which a willing buyer is actually releasing Dollars.  Dealer bids are a fuzzy form of price, but we have to utilize what we have available in an imperfect world.  And we don't know what that coin looked like either.  A weak MS65 or a strong MS64?  A sale must have transpired to establish an accurate price for anything.  But don't forget that we are also trying to discover a trend in addition to relative value.  Where has it been?  How does today's price compare with recent or all-time highs?  Does it appear to be gaining strength or weakening further?  Has it just corrected after a rapid price rise?

Instead of me spoon-feeding you with what I have discovered over several years at the expense of my fishing hobby, get ahold of the first week of January CDN prices for the $3 Gold in MS63 starting with January, 1997, and observe the price behavior either graphically or on a percentage year-to-year change basis to May, 2001.  I will give you a clue.  This is a rare coin series that I currently recommend and historically have recommended.  Truly rare, especially prior to 1874 with the exceptions of 1854 and 1855.  By truly rare, I mean the combined PCGS and NGC populations are less than 40 with about 20% of that number representing re-submissions or double counting.  When you think of the almost 300 Million people we have in this country, and if only 5 Million or less than 2% are serious collectors (or investors!), a survival of 40 pieces per date and mint mark won't satisfy many want lists.  And try to find a problem-free MS63 in a certified holder of a coin that was not very popular to begin with and melted down at will during the Civil War.  This is just one example of turning an "investors" analytical mind to the art of collecting.  

So it only makes sense that a rare coin "collector" should be an "investor" also.  Regardless of the primary motivation behind an acquisition, for the pride of ownership in a collection, the historic merit, or the investment potential of a given coin, the data gathering and analysis that should go into any "investment" of time, effort, and money is infinitely applicable.  The goals of either type of coin enthusiast are not mutually exclusive, but are complementary and integral to the success of either pursuit.  Pure collectors have a tendency to be more knowledgeable of numismatics than pure investors (unfortunately), but investor shrewdness and analysis must be constantly employed to guarantee long-term success at collecting.  Whether today's U.S. rare coin collector wants to admit it or not, he or she is effectively an investor in a highly collectible tangible asset that in most cases is increasingly rare due to the ravages of time and mishandling.  And the interested base, both collectors and investors, is increasing with world population and diminishing alternatives.  Enough said.

KNOWLEDGE IS POWER WHEN YOUR HARD-EARNED MONEY IS AT STAKE.