Coin Collecting 101
Newmismatist
Posts: 1,802 ✭✭
Here’s a slightly revised version of part of an Article I wrote last year on collecting Proof Indian Head Cents. I have made a few changes so that it is not specific to Indian Heads cents, but to the overall aspects of collecting coins. If you are new to coin collecting, there’s probably some information that will be helpful to you. If you’re still learning, there still may be some helpful information, but hopefully, you will have already gained a lot of expertise from your own experiences. If you are an advanced collector, you probably have a good working knowledge of everything I have written here. I hope those advance collectors and dealers will add their comments to what I have written here, as it is my firm belief that the more we share with our newer collectors the more WE ALL benefit from this great hobby. All of what follows are my personal opinions based on many enjoyable years of collecting coins.
In order to collect coins, whether it’s modern Lincoln Memorial cents, or classic proof gold, there are three essential ingredients, without which you will not be able to complete any nice set of beautiful coins: Knowledge, Grading and Value - with the last element being the easiest of the three if you have mastered the first of the two requirements.
KNOWLEDGE: Before you buy any coins, become knowledgeable with this hobby. As part of your learning experience, buy books that provide information about the coins you intend to collect. If you’re new, start with the Redbook, go to your local library, check out books on coin collecting, & read them. For example, if you collect Indian Head Cents, there are several excellent books that are currently available that will provide you with a wealth of information on Indian Head Cents. Two essential books are Q. David Bowers’ “Enthusiast’s Guide to Flying Eagle and Indian Cents” and Rick Snow’s “Flying Eagle and Indian Cents Attribution Guide”. The Bowers book is currently out of print, but may be reprinted in the near future. The Snow book is being published in 6 volumes, of which Vol. 1 and Vol. 6 are currently available. Also, if there is a local coin club in your area, you should become a member.
Second, you will need a working knowledge of the coins themselves - this can only be obtained by looking at lots of coins, asking questions, and making notes. Every reputable dealer that I have dealt with who sells coins will be pleased to share his or her knowledge of the coins you want to collect. A caveat: When at a coin show, if there are 10 people all waiting to look at the dealer’s coins, the dealer will be unable to answer a series of questions about the coins in general or a particular coin - wait to ask when there is time for a discussion - remember that the dealer at a coin show generally has substantial expenses to cover, please allow the dealer the opportunity to conduct his business - they will appreciate your courtesy. But, by all means, look at the coins and ask questions - that is how your knowledge and expertise will be acquired.
GRADING: LEARN HOW TO GRADE COINS - unfortunately, you cannot always rely only on the grading services or even the dealers who sell you your coins - they make mistakes, and if you don’t acquire your own working expertise of how to grade the coins of the series you want to collect, you will be at the mercy of the grading services or the seller of the coins and you will end up with their mistakes as part of your collection. Every collector that I know who has put together a great collection has made a concerted effort to learn how to grade the coins the he or she is collecting. In order to grade coins there are again three essential ingredients: 1) The knowledge of the series that you want to collect. 2) A good quality magnifying glass. 3) Light.
I’ve already discussed Knowledge above - in case I haven’t made my point clear - You cannot put together a great collection of any coin series unless you have a good working knowledge of that series. You can spend lots of money, and you can buy lots of coins, but without that Knowledge you won’t have a great collection. Besides - that’s the joy of collecting - the knowledge that you acquire and can discuss with other collectors.
A Magnifying Glass: Buy the best quality magnifying glass you can afford - If you are buying $5 coins, buy a cheap magnifying glass - it won’t matter, but if you are buying $500 coins, then you’d better buy a really good magnifying glass, and if you’re spending thousands of dollars for your coins, buy the very best magnifying glass - it will save you thousands of dollars!! You can buy a nice Bausch & Lomb 7x magnifying glass for about $15 - $20. When you’re learning use a glass with a larger viewing area, the smaller viewing areas on the higher power lens make it difficult to get an overall look at the coin. I’ve nbeen collecting for many years and I often buy expensive coins. My two favorite magnifying glasses are both German made and excellent for coin collectors: A Zeiss 3/6/9 or an Eschenbach 3/6/9. Both of these wonderful loupes have a large viewing area, and both have three different lens powers that can be used separately or together. (And no, I don’t have stock in either company and no, I don’t sell them). These magnifying glasses have two separate lens: a 3 power lens and a 6 power lens - each can be used separate from the other, or they can be joined together to have a 9 power lens - so without changing loupes, you can use a low power to look for toning and hairlines, then a medium power for minor defects and finally a high power for alterations and hidden defects. Note, I am told that the grading services use a medium power lens (5x) for grading - the higher power lenses are used to check die characteristics and alterations - both for grade alteration or counterfeiting.
Light: In order to properly grade coins and to properly use a magnifying glass you must have a good light source, and you have to learn how to use the light source to grade coins. Have you ever been to a coin show and watched a dealer look at a coin, particularly those dealers who are known as “crack-out” experts? Before they even pick up their magnifying glass, they take the plastic slab hold it about 9-12 inches away and rotate the coin - left to right, up and down, side to side. Then they will put the coin under the ubiquitous light that they have at their table and do the same thing, and then they will pick up their magnifying glass and look at the coin under the light while again rotating the coin as they look. What they are doing is using two different light sources to look for defects in the coin (the “natural” ambient light in the room and an artificial light source). Light will reflect off of the marks and hairlines and they show up as the coin is rotated. Scratches, fingerprints, marks and alterations will show-up as different colorations and surface characteristics as the coin is rotated. The color of the coin will reflect back at the viewer. Light is essential to grade coins - in fact, without a good light source that is properly used, you cannot accurately grade coins. Another fact that many are either unaware of or they ignore, is the fact that different kinds of light will make the coin look different. Have you ever bought a coin at a coin show and when you got home it looked different? The reason it looks different is because at home you are almost invariably looking at the coin either in natural daylight (if the room you’re in gets lots of sunlight and the lights are turned off) or incandescent light, which is the kind of lightbulb in most lamps. But at the show where you bought the coin, the lighting in the bourse was probably fluorescent ambient light from the ceiling fixtures and there is a good chance that the dealer had a halogen light at his table, (in addition to the 60 Watt incandescent light that is invariably over the showcase). Different kinds of light make coins look different! You should learn what the various light sources do to the look of the coin - and they have different effects on different metals! Copper coins look quite different in different light sources. Fluorescent light makes them look ugly, halogen light gives them a brighter, but slightly washed out look, incandescent light is a “warmer” light source and brings out the “reds” more and natural light makes them look more “red-brown” than “red”. So depending on your light source, a nice copper Indian Head Cent will probably look different at home than it did when you bought it - unless you duplicate the light conditions!
VALUE: Remember earlier that I said Value was the easiest of the three essential ingredients needed to complete a nice set of coins? It’s true. Value is determined by three factors: Rarity, Grade and Demand. If you have acquired the Knowledge regarding your choosen series, then you should know which of the dates are the rarities. If you have learned how to accurately Grade, you will be able to determine which coins are the nice examples. The Demand factor is the collector interest in the series and the desirability of the coin. The most common coin is readily available, and if there are large quantities available, the demand is spread over a vast number of coins. Example: As a collector, you don’t have to spend an exorbitant amount of money for a common 1884 PR65RB Indian Head Cent or a 1907 MS65RB, because there are many examples available - you might pay a little extra for a nicely graded coin, as opposed to one that is dull, spotted and ugly, but the premium shouldn’t break the bank. On the other hand, if you want the same coin in PR67RD or MS67RD, be prepared to pay a lot more money - they’re scarcer, and the small quantity available results in a greater demand for the few examples that are in the market place. Also, the fewer there are, the more likely they won’t be available for purchase at all, so an 1877 cent, 1909 S VDB, 16-D Dime all will cost more because of the rarity factor. When you combine Rarity, High Grade and Great Demand, the cost of that coin rises dramatically, hence the greater Value.
Finally, one of the things that is also essential to understanding Value is that when you use price guides - whether the grey sheet, the blue sheet, the pink sheet, other published value guides, or even auction records of actual sales - you have to equate the price information with the coin that you are contemplating purchasing. If the grey sheet “bid” for a coin is say $500 in PR65 and the coin that you are considering purchasing is a really nice example with great mirrors, wonderful colors and only the slightest of imperfections, and after having looked at many PR65’s you reaction is: “Wow - this is the nicest PR65 that I’ve seen!” - be prepared to pay more than “bid”. The coin might be worth twice bid - it might be worth 50% more than bid - but it will definitely be worth more than bid. On the other hand, if it’s dull, spotted, hairlined and your reaction is: “How did this ever get in a PR65 holder? It may not even be worth paying “Bid” and you should ask yourself - “Do I want this coin as part of my set?” ALWAYS BUY THE COIN, NOT THE PLASTIC. My personal opinion is that it’s better to pay a “little too much” and own a “wow” coin, than pay a lot less and own a coin that you don’t even like and nobody else wants.
(There are other more subtle factors that also relate to value in more sophisticated collections, two of these factors are condition rarity and attribution designations - Full Head - Stdg Liberty Quarters, Full Bands - Mercury & Roosevelt Dimes, Full Steps - Jefferson Nickels, Full Bell Lines - Franklin Halves, etc. If you’re a new collector, before you begin to spend significantly more money for these attributions or for top pop condition rarities, a word of caution: The significant premiums for coins with these attribution designations or low pop condition rarities may have an equally greater risk of value erosion over time. So when you reach the point were you are considering expanding your collecting interests by paying significant premiums for those types of coins, do your homework, be careful and collect wisely. Perhaps this will be a good topic for a "graduate" coin collecting!)
In order to collect coins, whether it’s modern Lincoln Memorial cents, or classic proof gold, there are three essential ingredients, without which you will not be able to complete any nice set of beautiful coins: Knowledge, Grading and Value - with the last element being the easiest of the three if you have mastered the first of the two requirements.
KNOWLEDGE: Before you buy any coins, become knowledgeable with this hobby. As part of your learning experience, buy books that provide information about the coins you intend to collect. If you’re new, start with the Redbook, go to your local library, check out books on coin collecting, & read them. For example, if you collect Indian Head Cents, there are several excellent books that are currently available that will provide you with a wealth of information on Indian Head Cents. Two essential books are Q. David Bowers’ “Enthusiast’s Guide to Flying Eagle and Indian Cents” and Rick Snow’s “Flying Eagle and Indian Cents Attribution Guide”. The Bowers book is currently out of print, but may be reprinted in the near future. The Snow book is being published in 6 volumes, of which Vol. 1 and Vol. 6 are currently available. Also, if there is a local coin club in your area, you should become a member.
Second, you will need a working knowledge of the coins themselves - this can only be obtained by looking at lots of coins, asking questions, and making notes. Every reputable dealer that I have dealt with who sells coins will be pleased to share his or her knowledge of the coins you want to collect. A caveat: When at a coin show, if there are 10 people all waiting to look at the dealer’s coins, the dealer will be unable to answer a series of questions about the coins in general or a particular coin - wait to ask when there is time for a discussion - remember that the dealer at a coin show generally has substantial expenses to cover, please allow the dealer the opportunity to conduct his business - they will appreciate your courtesy. But, by all means, look at the coins and ask questions - that is how your knowledge and expertise will be acquired.
GRADING: LEARN HOW TO GRADE COINS - unfortunately, you cannot always rely only on the grading services or even the dealers who sell you your coins - they make mistakes, and if you don’t acquire your own working expertise of how to grade the coins of the series you want to collect, you will be at the mercy of the grading services or the seller of the coins and you will end up with their mistakes as part of your collection. Every collector that I know who has put together a great collection has made a concerted effort to learn how to grade the coins the he or she is collecting. In order to grade coins there are again three essential ingredients: 1) The knowledge of the series that you want to collect. 2) A good quality magnifying glass. 3) Light.
I’ve already discussed Knowledge above - in case I haven’t made my point clear - You cannot put together a great collection of any coin series unless you have a good working knowledge of that series. You can spend lots of money, and you can buy lots of coins, but without that Knowledge you won’t have a great collection. Besides - that’s the joy of collecting - the knowledge that you acquire and can discuss with other collectors.
A Magnifying Glass: Buy the best quality magnifying glass you can afford - If you are buying $5 coins, buy a cheap magnifying glass - it won’t matter, but if you are buying $500 coins, then you’d better buy a really good magnifying glass, and if you’re spending thousands of dollars for your coins, buy the very best magnifying glass - it will save you thousands of dollars!! You can buy a nice Bausch & Lomb 7x magnifying glass for about $15 - $20. When you’re learning use a glass with a larger viewing area, the smaller viewing areas on the higher power lens make it difficult to get an overall look at the coin. I’ve nbeen collecting for many years and I often buy expensive coins. My two favorite magnifying glasses are both German made and excellent for coin collectors: A Zeiss 3/6/9 or an Eschenbach 3/6/9. Both of these wonderful loupes have a large viewing area, and both have three different lens powers that can be used separately or together. (And no, I don’t have stock in either company and no, I don’t sell them). These magnifying glasses have two separate lens: a 3 power lens and a 6 power lens - each can be used separate from the other, or they can be joined together to have a 9 power lens - so without changing loupes, you can use a low power to look for toning and hairlines, then a medium power for minor defects and finally a high power for alterations and hidden defects. Note, I am told that the grading services use a medium power lens (5x) for grading - the higher power lenses are used to check die characteristics and alterations - both for grade alteration or counterfeiting.
Light: In order to properly grade coins and to properly use a magnifying glass you must have a good light source, and you have to learn how to use the light source to grade coins. Have you ever been to a coin show and watched a dealer look at a coin, particularly those dealers who are known as “crack-out” experts? Before they even pick up their magnifying glass, they take the plastic slab hold it about 9-12 inches away and rotate the coin - left to right, up and down, side to side. Then they will put the coin under the ubiquitous light that they have at their table and do the same thing, and then they will pick up their magnifying glass and look at the coin under the light while again rotating the coin as they look. What they are doing is using two different light sources to look for defects in the coin (the “natural” ambient light in the room and an artificial light source). Light will reflect off of the marks and hairlines and they show up as the coin is rotated. Scratches, fingerprints, marks and alterations will show-up as different colorations and surface characteristics as the coin is rotated. The color of the coin will reflect back at the viewer. Light is essential to grade coins - in fact, without a good light source that is properly used, you cannot accurately grade coins. Another fact that many are either unaware of or they ignore, is the fact that different kinds of light will make the coin look different. Have you ever bought a coin at a coin show and when you got home it looked different? The reason it looks different is because at home you are almost invariably looking at the coin either in natural daylight (if the room you’re in gets lots of sunlight and the lights are turned off) or incandescent light, which is the kind of lightbulb in most lamps. But at the show where you bought the coin, the lighting in the bourse was probably fluorescent ambient light from the ceiling fixtures and there is a good chance that the dealer had a halogen light at his table, (in addition to the 60 Watt incandescent light that is invariably over the showcase). Different kinds of light make coins look different! You should learn what the various light sources do to the look of the coin - and they have different effects on different metals! Copper coins look quite different in different light sources. Fluorescent light makes them look ugly, halogen light gives them a brighter, but slightly washed out look, incandescent light is a “warmer” light source and brings out the “reds” more and natural light makes them look more “red-brown” than “red”. So depending on your light source, a nice copper Indian Head Cent will probably look different at home than it did when you bought it - unless you duplicate the light conditions!
VALUE: Remember earlier that I said Value was the easiest of the three essential ingredients needed to complete a nice set of coins? It’s true. Value is determined by three factors: Rarity, Grade and Demand. If you have acquired the Knowledge regarding your choosen series, then you should know which of the dates are the rarities. If you have learned how to accurately Grade, you will be able to determine which coins are the nice examples. The Demand factor is the collector interest in the series and the desirability of the coin. The most common coin is readily available, and if there are large quantities available, the demand is spread over a vast number of coins. Example: As a collector, you don’t have to spend an exorbitant amount of money for a common 1884 PR65RB Indian Head Cent or a 1907 MS65RB, because there are many examples available - you might pay a little extra for a nicely graded coin, as opposed to one that is dull, spotted and ugly, but the premium shouldn’t break the bank. On the other hand, if you want the same coin in PR67RD or MS67RD, be prepared to pay a lot more money - they’re scarcer, and the small quantity available results in a greater demand for the few examples that are in the market place. Also, the fewer there are, the more likely they won’t be available for purchase at all, so an 1877 cent, 1909 S VDB, 16-D Dime all will cost more because of the rarity factor. When you combine Rarity, High Grade and Great Demand, the cost of that coin rises dramatically, hence the greater Value.
Finally, one of the things that is also essential to understanding Value is that when you use price guides - whether the grey sheet, the blue sheet, the pink sheet, other published value guides, or even auction records of actual sales - you have to equate the price information with the coin that you are contemplating purchasing. If the grey sheet “bid” for a coin is say $500 in PR65 and the coin that you are considering purchasing is a really nice example with great mirrors, wonderful colors and only the slightest of imperfections, and after having looked at many PR65’s you reaction is: “Wow - this is the nicest PR65 that I’ve seen!” - be prepared to pay more than “bid”. The coin might be worth twice bid - it might be worth 50% more than bid - but it will definitely be worth more than bid. On the other hand, if it’s dull, spotted, hairlined and your reaction is: “How did this ever get in a PR65 holder? It may not even be worth paying “Bid” and you should ask yourself - “Do I want this coin as part of my set?” ALWAYS BUY THE COIN, NOT THE PLASTIC. My personal opinion is that it’s better to pay a “little too much” and own a “wow” coin, than pay a lot less and own a coin that you don’t even like and nobody else wants.
(There are other more subtle factors that also relate to value in more sophisticated collections, two of these factors are condition rarity and attribution designations - Full Head - Stdg Liberty Quarters, Full Bands - Mercury & Roosevelt Dimes, Full Steps - Jefferson Nickels, Full Bell Lines - Franklin Halves, etc. If you’re a new collector, before you begin to spend significantly more money for these attributions or for top pop condition rarities, a word of caution: The significant premiums for coins with these attribution designations or low pop condition rarities may have an equally greater risk of value erosion over time. So when you reach the point were you are considering expanding your collecting interests by paying significant premiums for those types of coins, do your homework, be careful and collect wisely. Perhaps this will be a good topic for a "graduate" coin collecting!)
Collecting eye-appealing Proof and MS Indian Head Cents, 1858 Flying Eagle and IHC patterns and beautiful toned coins.
“It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so.” Mark Twain
Newmismatist
“It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so.” Mark Twain
Newmismatist
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Bulldog
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Most of your observations I learned the hard way.
An article like this when I first started collecting would have saved me thousands !
<< <i>thanks Newmismatist,
Most of your observations I learned the hard way.
An article like this when I first started collecting would have saved me thousands ! >>
You're welcome and I hope some of it helps for future collecting endeavors. Believe me, those "observations" were not inexpensive for me. But, when I made a mistake, I tried to learn from it and not repeat it.
A note on the magnifying glasses: I have saved tens of thousands of dollars by having a good magnifying glass, and possibly made as much for the same reason. If you're gonna collect expensive coins, buy a GOOD magnifying glass and learn how to use it
“It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so.” Mark Twain
Newmismatist
Value is an issue that I have struggled with in the past. For people who are not closely plugged in to the market, it can be difficult to know whether a nice coin with a 50% premium over bid is priced reasonably or exhorbitantly. I don't mind paying a fair price, but I've seen too many times where the premium charged for the proverbial PQ coins was unjustifiably large.
I would reiterate to newer collectors and those who aren't skilled at grading - remember that Newmismatist said in his hypothetical example of a coin being worth 50% over bid or more, that it can be justified when after having looked at many PR65’s your reaction is: “Wow - this is the nicest PR65 that I’ve seen!” . If you absolutely want the coin, and the price doesn't matter, then by all means acquire a really nice coin. But be aware that it takes much experience as well as knowing the current market intimately to know if the asking price is appropriate or whether the seller just wants more than the coin is worth.
New collectors, please educate yourself before spending money on coins; there are people who believe that using numismatic knowledge to rip the naïve is what this hobby is all about.
<< <i>Value is an issue that I have struggled with in the past. For people who are not closely plugged in to the market, it can be difficult to know whether a nice coin with a 50% premium over bid is priced reasonably or exhorbitantly. I don't mind paying a fair price, but I've seen too many times where the premium charged for the proverbial PQ coins was unjustifiably large.
I would reiterate to newer collectors and those who aren't skilled at grading - remember that Newmismatist said in his hypothetical example of a coin being worth 50% over bid or more, that it can be justified when after having looked at many PR65’s your reaction is: “Wow - this is the nicest PR65 that I’ve seen!” . If you absolutely want the coin, and the price doesn't matter, then by all means acquire a really nice coin. But be aware that it takes much experience as well as knowing the current market intimately to know if the asking price is appropriate or whether the seller just wants more than the coin is worth. >>
Kranky
You're absolutely correct that only experienced collectors should pay "50%" over bid for coins and ONLY if they really understand the market in that particular coin. My article originally dealt with proof IHCs - I changed my post to be more generic and apply to all coins, but left in the 50% more remark. In the original article I was specifically referring to Pr65RB IHCs - and an exceptional Pr65RB, that is say 95% red and a high end PQ coin is worth probably double bid because, a RD coin is usually worth 3-4 times 65RB bid. But when I changed this to just a 65 coin, the context of that added "color premium" is lost, so your point is good advice to novice collectors. Perhaps I should have used the IHC as the example, or a MS Morgan with great surfaces, great toning & PL fields, as the example - either way what I was trying to convey to any collector is: once you learn how to grade, and have developed a good working knowledge of the series that you are collecting, then you will be able to determine if you can (or should) pay the premium for the PQ coin.
I am not advocating paying more than a coin is worth just to own it, but an informed collector who knows how to grade (who if he's reached that level, would no longer be a newbie) should be able to figure out that to own "WOW" coins always requires paying a premium, how much of a premium, 5%, 50% or double bid is not a quantifiable figure, that's the collectors decision. You've got to have a good knowledge about what you're doing before you take that leap.
Personally, (& this may not apply to other collectors) I'd rather own a "WOW" coin
“It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so.” Mark Twain
Newmismatist
1. Buy "Photograde" by James Ruddy, (c) Bowers and Merena Galleries, Inc.
2. Join the American Numismatic Association (ANA), and read their publication, The Numismatist. Also check out their materials for free.
3. Talk to people who have actually dealt in the items you're interested in.
4. Set a goal, e.g., completion of a particular set or a type set.
5. Learn how to negotiate.
Check out a Vanguard Roth IRA.
<< <i>..as it is my firm belief that the more we share with our newer collectors the more WE ALL benefit from this great hobby. >>
I wholeheartedly agree and the post (based on years of collecting experience and insight) which began this thread, goes a long way toward that goal.
<< <i> I do have one question about the lighting. I understand, different lighting makes the coin look different. But then what is the proper lighting to look at a coin? I've heard 100W incandescent, is that the concenses? >>
I'd suggest 100W incandescent for grading, but I'd also suggest that you get a Halogen light & use it also because, lines, and marks are somewhat easier to see w/a Halogen light. In other words look at it w/Halogen to see what's there, but use incandescent for grading.
“It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so.” Mark Twain
Newmismatist
I have been trying to hone my Grading skills, and the only piece of advice I can give is this - at the beginning I thought that I could "shoot from the hip" grade a "circulated" coin, because I had read the grading standards and looked at many examples. When I did this, I was always wrong. I've noticed that when I actually take my time, and look at all areas of the coin, compare to the grading standards for that particular coin, look at the coin some more, back to the grading standards, etc - that I usually match either the slabbed grade, or agree with the majority grade (if it is on this forum). I think when I first started I thought that after a while I could pick up a coin and go - oh yeah, EF-40 - I inevitably always miss something. I am far from being able to grade based on experience.
The only other thing that I have learned the hard way (and I am still learning) - is to look closely at the rims of a coin that I've purchased via ebay. I get caught up looking at the luster, strike, etc, that I completely miss an ugly rim dent or dig.
You are doing well, subject 15837. You are a good person.
Great lesson Numismatist.
I bought a Zeiss 3/6/9 some time ago on another board member's recommendation and have been very pleased with its varying magnification powers.
Thought I would include a link to the vender that I purchased from. Can't say whether the price was competitive or not, but the online purchase was easy and the shipping was very quick.
New collectors, please educate yourself before spending money on coins; there are people who believe that using numismatic knowledge to rip the naïve is what this hobby is all about.