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Jan162013

02:40:12 am

What do I need to know about investing in precious metal coins?

Today, collectable sets and series of commemorative coins are struck by mints all over the world.  Notable examples include the Royal Mint in the United Kingdom, the United States Mint in the USA, the Royal Canadian Mint in Canada, and the China Gold Coin Incorporation in China.  These mints produce a variety of collectable coins made from both precious and non-precious metals and often operate several mints in their respective countries.  Investing in these collectable coins as a profit making exercise is becoming increasingly popular, not only because it has the potential to make money, but also because it is extremely good fun and can be a very rewarding and engrossing experience.

Those collecting coins for investment purposes tend to collect those made from precious metals - the most common being gold and silver, but platinum and palladium coins also feature on today's markets.  Short term spot price fluctuations aside, acquiring these sorts of coins tends to be a long term defensive investment as the market value of such precious metals tends to rise over longer periods of time.  This means that this type of collecting is unlikely to make you a fast buck - so be prepared to be patient and sit on your investment for a while.  In addition to the trends in bullion value, their value is also likely to increase over time, as mints have the tendency to issue only limited numbers.  After several years, perhaps through loss or other such reasons, they become rarer.  As time passes the condition of the coins may get worse as they are mishandled, scratched, or dropped.  So, provided that you are careful and you can keep your coins in mint condition, they will be worth even more!

Trading in coins for making a significant profit requires a certain level of capital funds so should not be undertaken lightly.  However, for hobbyists who are looking for a fun and rewarding pastime with the added incentive that their interest is earning them a little extra money on the side (regardless of whether they plan on selling their meticulously acquired collections), numismatics is a highly accessible hobby for people with any budget - and with current global economic conditions being in the poor state that they are, investing in coins may be the safe option for your hard earned savings.  This is because, unlike other assets, the nature of the rare coins market means that it remains mostly unaffected by fluctuations in other markets.  It is a stable, upward trending, and strong market, showing little or no signs of volatility.

If you are looking to go down the route of investment for serious profit, then there are a few things to know and look out for.  Firstly, as with any collecting, it is important to specialise and focus; do your research; and be knowledgeable about what you are buying and selling.  Unfortunately, the rarest pieces are sometimes counterfeits and suffer from over grading - i.e. where the quality of the coin is lower than that advertised, thereby not reflecting its true value.  For those who are not experts, launching headfirst into the marketplace can be a bit of a minefield, so it's a good idea when taking your first steps in this area to get a reputable dealer to give you advice or compile a portfolio for you.

Secondly, there are very few genuine bargains available when buying.  That is why it is unlikely to make you significant profits in the short run and is more suitable as a long term investment.  So for this reason it is always a good idea to buy the best coins that your budget allows for, and to buy the coins in the best condition you can afford to secure their long term value.  High-quality pieces increase in value at a greater rate than lower-quality ones, so buy the best.

Thirdly, the difference between a hobbyist and and investor is that an investor must eventually sell their collections.  When coins reach their full price potential they should be sold.  For this reason, again, it is important to be knowledgeable about what you are buying and selling to know the real value of your investment.

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