As a coin collector, how often should you be selling your coins? One of the great things about being a collector in a strong market such as this is the possibility of selling coins after a fairly short holding period and either making money or, at the very least, breaking even. In my opinion, understanding the selling process is every bit as important—if not even more important—then figuring out how to properly buy coins. Back in the Bad Old Days of the 1990’s, if you tried to sell a coin you bought within a year or two of its purchase, the chances were excellent that it would cost you dearly. Assuming you paid the then-typical 20-30% dealer markup, your decision to sell quickly was likely to cost you as much as 35-40%. Ouch!
In 2006, coins are more liquid than I can ever remember. Unless you grossly overpay for something that you probably had no business buying in the first place, you are likely to be able to sell your albatross-in-the-making for a number that doesn’t make you want to cry.
This is both good and bad. It has enabled collectors to look at certain pieces as rent-a-coins that they know they are only going to have around for a short period of time; not unlike a baseball team trading for a potential free agent knowing that this player will help them during a pennant run but will probably be gone the next year. In my opinion, I think it’s great that collectors buy certain coins knowing that they will not be putting them away forever. As I stated above, it familiarizes them with the selling process and it helps to recycle coins that might otherwise not sell.
But there can be a downside to this process as well. Collectors who are new to the market have been spoiled by the seeming boundless strength of the past two or three years. They have a mentality that says “if I buy this coin at auction I really can’t overpay. And even if I do, someone else will come along in the next auction and pay even more than I did.” For the last few years they have been right. But when the market slows down, collectors with this attitude are likely to be left holding coins that will radically decline in value.
I think the perfect compromise is to have two segments to your collection. Have a core collection which amounts to, say, 75% of the dollar value of your holdings. These are the coins that are your specialty and the ones you are likely to keep through the next few market cycles; both up and down. In addition, have a non-core holding of coins that you think are interesting and appealing but which you know are not going to remain in your collection for more than a year or two.