How to Become a Good Coin Collector

One of the oldest jokes in the book goes, "How do I get to Carnegie Hall? Practice, practice, practice." Hoary? Yes. Old when your grandpa was a kid? Sure. But oh so true and applicable to the subject of this blog which is, as you no doubt already know, "how to become a good numismatist." Because to become a good collector, you do need to practice. But what exactly do you need to practice most? I think the most important piece of advice I could give a new collector is to look at as many coins as possible. There are self-proclaimed numismatic experts who gain their knowledge from research but the truly savvy collectors that I have met have acquired their knowledge the same way that I have: they've looked at countless coins.

How do you get to look at coins? There are really only two ways that the average collector is going to be able to view significant numbers of important coins: at shows and at auctions. If you specialize in a specific sort of coin, make certain that you spend the limited amount of time you have at shows or at auctions looking at the coins you really need to be viewing; save the numismatic tourism for later.

One trick I suggest that collectors try at auction viewing is to cover the grade of the coin that they are looking at and guess what the grade actually is. Or, establish grade parameters and write if you think the coin is an "A" "B" or "C" quality example. After the sale is over and you analyze prices realized, you can get an idea of how accurate your precision grading really is.

I can't think of a better way to become a good collector than to buy, sell and trade coins. I'm not saying that you have to become a fledgling numismatic empire. But I think one of the best ways to become comfortable with any hobby is to be an active participant in both the buying and selling side.

One of the things that you learn from being a buyer and a seller is how to calculate your "upside/downside rate" with each purchase. It might be easy to justify paying $3,500 for a certain Dahlonega half eagle for your collection but what would it sell for if you placed it in the open market? $2,750? $3,000? $3,500? As they say, you can't play if you don't pay...

You've probably read a hundred times how important it is for a collector to learn how to grade. I haven't met that many collectors who know how to grade; at least outside of their realm of expertise. But the most successful collectors I've met all share at least one trait: they understand the aesthetics of numismatics. In other words, they may not be able to tell the difference between an MS62 and MS63 Charlotte quarter eagle but they know the difference between a below-average coin, an average coin and a high end coin.

The "aesthetics" of coins is probably the most important point I'm making in this blog. To be a good collector you really need to understand what constitutes a "good" coin in your series. If you collect St. Gaudens double eagles, the parameters will be much different than if you collect Type One double eagles.

And this is where having a good relationship with a dealer enters the picture. Behind every great collector there is a great dealer who acts as a conduit, providing information, guidance and coins. In this day of information overload it is tempting to think that the collector can go it alone and build a meaningful collection bidding in on-line auctions. If you are incredibly lucky, you'll only make an occasional mistake going the I-can-do-it-myself route. If you have average luck, you'll make a number of errors and some may prove costly.

One last thing: study and read all that you can about the coins that interest you and the market itself. It never ceases to amaze me when I hear stories about very successful businessmen who spend $1 million on generic gold and overpay by 40%. You would think they would spend thirty minutes on the web to compare prices and get a feel for the absolute basics of the market.

I've said this before and I'll say it again: the time that you put into numismatics will be doubly or triply rewarded as you wade further and further into the coin pool. This can be an infuriatingly complex hobby but there are ways to simplify it and this will only serve to give you more and more enjoyment.

How to Assemble A World-Class Collection of Coins

You can have unlimited funds but without adhering to a basic core group of numismatic fundamentals, I believe it is very difficult--if not impossible--to build a great collection of coins. Some of the best collections I have seen in the last few decades were built by collectors with average discretionary income levels. But these people were true collectors and they understood most of the points that I am going to raise and address in this article. There are literally dozens of fundamental rules that a collector could follow. I am going to stick with ten and give you some insight as to how these rules help me when I make my own decisions on what to purchase and what to avoid.

1. Learn to Identify Value. Some coins are good values while others are poor values. The smart collector is one who is able to identify the coins that are the best values and then takes advantage of this situation. There are numerous 18th and 19th century that are very undervalued. Some of these are likely to remain undervalued because they are in series that are likely to never become popular. Others, however, are part of series (such as Liberty Head half eagles or eagles) that are either just on the cusp of becoming popular or, in the case of eagles, are already coming into their own.

How do you identify coins that are really good values and not those that are being hyped by dealers who'd like you to believe that they are? In this day and age, it is easy to have access to a tremendous amount of numismatic information. The PCGS and NGC population reports, while not perfect, offer insights into rarity and availability that are unparalleled. The PCGS and Heritage auction result archives allow collectors to determine how frequently a coin appears at auction and in the case of the Heritage archives, has photos of each coin sold. Virtually all major dealers now list coins for sale on their websites and this is another good way to determine what is available and what isn't.

A world-class collector is able to identify coins that are good values before they become widely known. The collector who, a decade ago, bought undervalued issues like the 1854-O and 1856-O double eagle, saw tremendous returns on their purchases. What will the next undervalued rarities be?

2. Carpe Diem. Translated into English, this term means "seize the day." In the case of building a great collection, fast and clear thinking is very important. Really nice coins are incredibly hard to find right now and the collectors who are able to buy them are the ones that make fast decisions. In the case of my company (Douglas Winter Numismatics), when I buy coins, I typically put them on my website on a first-come-first-served basis. I constantly hear from collectors who wish they had pulled the trigger faster.

Here's an interesting story. At the recent Philadelphia coin show, I was talking to a very sophisticated collector about his coins. He couldn't really remember everything he bought; understandably so when you consider that he owns hundreds of great coins. But he did remember every single coin that he should have bought but which were the ones that "got away." And I don't think that this gentleman is alone. Most collectors who have great sets of coins grew these sets by intelligent, quick decisions; not hemming and hawing for three days.

3. Learn How to Determine What's a Nice Coin. Notice I didn't say "learn how to grade." I've written this statement before and I've come to realize that this is not a realistic goal for most collectors. It's like a doctor telling me to learn how to self-diagnose. Even if I had the time, I don't have the skill(s) to learn this. And neither do most collectors.

But you can learn to determine what makes a coin nice versus what makes one ordinary. You can learn how to determine if a coin has original surfaces or if it is bright and shiny from a recent processing. You can learn what color a Charlotte gold dollar from the 1850's is supposed to be and learn to pass on coins that aren't "right."

How are some of the ways you can learn this? Study photos online. Look at which coins have CAC stickers and pay attention to these higher-end coins. Go to auction lot viewing and check out the coins which are relevant to your field of specialty. Most importantly, don't sweat the small stuff when it comes to grading. Its more important to learn the difference between a nice MS62 Dahlonega gold dollar and a low-end one than it is to be able to tell the difference between an MS61 and an MS62.

4. Cultivate a Trusted Source. It's likely that some readers will misconstrue the intentions of this point and say "Oh, he's a dealer and he's just trying to drum up business for his firm." This is partly true; I do write these articles partly to boost the DWN brand. But I also like share information and feel it is important to mentor new collectors. And I think having a good source for your coins is really important. As someone who collects paper money, I can tell you that you can't build a great collection all by yourself; you need an expert to provide you with a second opinion.

If you have a real job, you are never going to be able to compete against a full-time coin dealer like myself. (If it makes you feel better, I have no visions about being able to compete against you in your business. But I will be happy to play you in a one-on-one basketball grudge match...)

Bottom line: find a dealer who you like, who you trust, who has nice coins and who is fair with you. They are out there.

5. Learn How to Sell. From time to time, you will need to purge your collection. You might have a duplicate that you want to sell or you might have generic Saints that are in a profit position. Learn how to sell them and how to maximize what you have to sell.

Not everyone wants to sell coins the same way. Some collectors want to micro-manage their sales and decide to conduct the process by themselves. Other collectors want limited involvement and decide to put their duplicates in auction. I like the option of using your trusted dealer (see #4 above) as a selling source.

Coin collecting is a two-way market. People spend lots of time learning how to buy coins but seldom learn the selling aspects. The best collectors that I've met understand both and have had positive selling experiences.

6. Build a Library. I have a pretty nice working library and seldom does a day go past that I don't use it. Books and catalogs help me make intelligent buying decisions. They help me establish pedigrees. They help me determine how rare a coin is. I can't imagine being involved in numismatics and not maintaining at least a small coin library.

You don't need to overdo this. If you collect U.S. gold coins, an essential working library might consist of about 10 to 15 books (I'd like to think that at least a few of them will be ones that I've written...) and maybe two to three dozen auction catalogs. To be honest with you, I don't use probably 90% of the auction catalogs that are in my library and over the course of time its likely that I'll jettison the ones that I don't regard as essential. To build a good gold coin library you are talking about $500 to $1,000. It's the best money you'll spend. Trust me on this one; even if you don't believe me on any of the other points I'm trying to make here.

7. Be a Mensch. Yeah, I know the cliche is that "nice guys finish last." And I know that to buy coins you have to be aggressive and even a bit pushy. But you can be a nice guy when doing this and being a nice guy is going to score a lot more points with dealers, auction houses and other collectors than being a jerk.

Many of the men that come to mind when I think "great collector" are really nice guys. People like Barry Enholm, Tom Bender, Steve Duckor, Robert Kanterman, and Dale Friend. These guys are A+ collectors but they are also the types of people I'd actually like to go out with and have a nice dinner. And there is a reason that these guys get offered great coins. Hint: its not only because they are serious and they can write a check for a big coin. It's because they are nice guys who are easy to deal with and whose word you can take to the bank.

8. Really Learn Your Market Area(s). I love dealing with smart collectors and I try to do everything I can to make collectors smarter. But I often meet collectors who have made really bad decisions because they didn't learn their market area(s).

I understand that people are busy and they can't become overnight experts. This is one reason why I've always liked the concept of specializing. It's easier to be very knowledgeable about a few dozen issues (say, Dahlonega quarter eagles and half eagles) then it is to try and learn the ins and outs of the entire early gold market.

But this doesn't mean that you can't learn a few basic market skills. Learn how to see what coins are selling for at auction so you don't wind-up overpaying. Become savvy enough to determine which population figures are reasonably accurate and which are obviously inflated by resubmissions. Analyze what sort of premiums CAC coins are selling for. I believe that the time you take to learn your market areas will pay great dividends for you.

9. Patience, Patience, Patience. You can assemble a set of Dahlonega gold coins in a few months. Believe me, I've seen these rushed sets and the results are usually not very pretty. The collector who has rushed through a set might be lucky and one-third of his coins are be nice. But it is more likely that most will be over-graded and many will be hideous.

Or you can assemble a set slowly and carefully. Its likely that a few coins won't be high-end but most are going to be very nice. You'll have more fun buying one coin here and one coin there. And when you go to sell your coins, your bottom line should be a lot more exciting. Remember: relax, have fun. Collecting is a marathon and not a sprint.

10. Don't Take It So Seriously. As I mentioned above, no one likes a passionate collector more than I do. I feel lucky to be working with collectors who love coins as much as I do. But sometimes I meet a collector who takes things a little too seriously.

Relax. Its just a hobby. Have fun. Coin collecting is supposed to be therapeutic; not something that puts you into therapy.

I could go on and on with suggestions on how to assemble a great collection and how to be a great collector. I'd like to hear your suggestions and welcome your comments.

Tips on Selling Your Coins Via Dealer Consignment

Many retail dealers, myself included, welcome consignments from collectors. It's a great way to increase the size of a dealer's inventory without laying out cash and it is often an excellent source for dealers to place useful, fresh attractive coins to new or existing clients. As a potential consignor, what are some of the questions you should be asking a dealer and what are some of the expectations you should have? 1. What rate should you be paying a dealer? I can't speak for every dealer, so I'll share this from a DWN perspective. I generally charge between 5 and 10% to sell a coin on consignment. I've heard of dealers charging more than 10% and that seems a bit on the gouge-y side. On the other hand, to expect a dealer to sell your coins for less than 5% is unreasonable unless you are talking about a very low spread item like bullion or generics (which probably shouldn't be consigned to dealers in the first place).

2. What should my expectations be as a consignor? Obviously, your first expectation is for the coin to sell. But there should be other expectations as well. You should expect a dealer to work hard at selling your coins. This means listing them promptly on his website, imaging them, giving them good descriptions and offering them directly (via phone or email) to existing clients. You should expect clear, concise paperwork from the dealer including a receipt stating the terms and conditions of the consignment. You should expect prompt payment with good funds. And you should expect honesty and integrity. No games, no "funny stuff."

3. What sort of payment terms should I expect? There is no set answer to this so, once again, I'll share with you how I take care of payment. First of all, I am very careful to sell consigned coins to collectors or dealers who I know will pay me. There are certain dealers, for instance, whose check I absolutely will not take. I wouldn't sell these guys any of my own coins so why would I subject a collector to the risk of "will I or won't I get paid?" I generally pay clients for coins within a few days of being paid myself; a few days usually meaning two or three. In the case of having multiple coins on consignment from one collector, I pay them as they sell. I never wait until the end of a deal to pay the consignor and I don't think that's fair, unless that's what the consignor requests.

4. How long should the consigning process take? This depends on the coins that your are consigning. If you have very esoteric coins, the consignment process is going to take a while (in this case maybe three months or so). If you have very liquid coins, the process should be short (in this case just a few weeks). I would suggest that you ask the dealer how long that you think it will take him to sell each coin in the consignment. You don't want to let the consignment process go on forever. If your coins are appearing on a dealer's website they will be "stale" after a few months and will be very hard to sell in the near future should you decide to put them in auction or with another dealer.

5. How should I price the coins I am consigning? It is important to price your coins realistically or they are not likely to sell. Some dealers will take any coin that you offer them at any price. Other dealers, myself included, will probably pass on coins that are not priced in line with the current market. I would suggest you price your coins the same way that I do: look to see if there are recent comparables at auction and use these as a base line. There are, of course, exceptions to this rule. An extremely rare coin, a coin in an old green label PCGS holder or something that is currently very "hot" might deserve premium pricing. As a seller, you need to ask yourself, how badly do you want to move your coin(s)? If you price a $5,000 coin at $8,000 it is likely to taint it and potential buyers may be skeptical when the price is suddenly--and dramatically--reduced.

6. What about consigning special collections? Over the years I have had a number of in-depth specialized collections consigned to me for sale. For these collections, I've created special "websites within my website" that feature these coins and they are not intermixed with my regular inventory. I would suggest that you request this when selling. It is smart marketing, it should help to sell your coins and it's a nice, lasting memorial for your collection that you can keep record of. If the dealer you are using to sell your coins is web-oriented and he is incapable of providing this service, I'd suggest you question whether he is the right person to sell the coins. If the dealer is just going to sell them wholesale, then this process is, of course, not needed.

7. What should you not expect? Just as you should have expectations of what to expect from the dealer you select, there are a few things you should not expect. One of these is for the dealer to have an obligation to tell you who your coins were sold to. You certainly have every right to tell the dealer not to sell your crusty original coins to an "upgrader" who is likely to strip and ruin them. You probably shouldn't expect daily updates on how your consignment is doing but it isn't asking too much of your dealer to hear, from time to time, how the consignment is faring.

8. How should I choose the dealer I consign to? If you've made it this far, you are probably waiting for the answers to this important question. I'd say the two most important things to consider are the relationship you already have with the dealer and his ability to understand (and get good prices) for your coins. If you have been dealing exclusively or semi-exclusively with a dealer for a few years and you like/trust this person it seems obvious to select him to sell your coins. The second point seems obvious but is worth reiterating. I think my firm is a great choice to sell branch mint gold or early gold but I'd be a poor person to sell a high grade set of Buffalo Nickels. I could probably do a decent job of presenting Buffalo Nickels but I don't know the series well and have zero clients for these coins. In this increasingly specialized market, it makes sense to choose someone who is a specialist himself, providing that you have a collection with a reasonably specific focus.

I think dealer consignments are a good way to sell your high quality, rare United States coins. Hopefully this short blog answered a few questions. If you have more, please feel free to contact me via email at dwn@ont.com

What Makes Certain Coins Popular--and Others Unpopular?

I often make buying decisions based on a coin's popularity. As an example, I will buy a coin like an 1839-O quarter eagle for stock because it is popular and I know it will sell. But I might pass on a rarer coin like an 1862-S quarter eagle because it is not a popular issue and it will be a harder coin to sell. This got me to to thinking: what makes one coin popular and another unpopular? Certain 20th century series are popular with collectors because of a strong nostalgia factor. I would imagine most of the collectors who focus on Lincoln Cents or Mercury Dimes remember collecting them as a kid and the sense of accomplishment that they get from completing a set is an act of closure that extinguishes the nightmares they felt as kids about filling those pesky 1909-S VDB Cent and 1916-D Dime holes.

The nostalgia factor does not really apply to gold given the fact that circulation for these coins ended in the early 1930's. There are certainly some collectors who can remember being given an Indian Head quarter eagle for the holidays by their grandparents or aunt and uncle. But I'm willing to bet that the majority of gold coin collectors are not working on a set of Charlotte half eagles because it rekindles pleasant childhood memories.

The word "promotion" gets a bad rap in numismatics. Yes, there are naughty promotions where worthless modern trinkets get hyped and sold to unsuspecting people for multiples of their true value. But in the better sense of the word, coin promotions can turn formerly unpopular series--like Type One Liberty Head double eagles--into popular ones. The key to a coin promotion is that it has to be sustained and it needs more market participants than the first wave to regenerate its initial success(es).

I mentioned the Type One double eagles series in the last paragraph. One of the most brilliant coin promotions of all time was the S.S. Central America.. The marketing group that owned the coins not only was able to sell them, they were able to generate enough new interest in this denomination that it impacted all Type Ones, not just the few dates that were included in the hoard.

A coin that is historic is always going to be popular. What represents "history" to be may not be what represents history to you. But I'm almost certain we can both agree that a gold coin produed in the 18th century--the first decade of the operations of the new U.S. Mint--is clearly historic. This is one reason why a coin like a 1795 half eagle or a 1799 eagle, while not truly "rare," is still always going to have a very high level of demand among collectors.

Other coins are historic due to numismatically significant factors. In the first paragraph I mentioned the 1839-O quarter eagle. This is a coin that is fairly common in lower grades yet I still really like the issue and will buy nearly any problem free example I can find. Why? It is a first year of issue coin, it is a one year type and it is a visually interesting issue in that it has the short-lived Classic Head design paired with the obverse placement of the mintmark. These factors give it broad appeal and it is one of the few New Orleans quarter eagles that would be of interest to a non-specialist.

Another factor that makes a coin popular or unpopular is its design. A coin like a High Relief is extremely popular because it is beautiful and its design appeals to virtually all collectors. "Plain Jane" coins like three cent nickels and liberty head nickels get little respect from collectors because, to be frank, they are not especially attractive designs.

There is an element of geography with certain types of coins that makes them popular. Dahlonega gold coinage has a large following in the Atlanta and North Georgia area due to having been produced in this part of the country. This isn't to say that a collector from New York City might not become a major collector of Dahlonega gold but the majority of interest in these coins tends to be in the south.

A factor in determining the popularity of a coin has to do with the availability of good reference material. Without tooting my own horn too loudly (OK, at least not blaring it...) I'd like to think that part of the reason that Southern branch mint gold is popular has to do with the fact that I have written easy to use basic reference guides that are updated every few years, inexpensive to purchase, readily available and easy to transport to coin shows and auctions. This might be a coincidence, but the two least popular 19th and early 20th century gold issues (Philadelphia and San Francisco mints) are the ones that I just happened to not have written books about. At least yet...

Size has become an important factor in making gold coins popular or unpopular. Double eagles are more popular than gold dollars mostly because they are much bigger. People like bigger coins and new collectors feel more justified in spending $3,000 for a big, hefty double eagle than they do for a small gold dollar. As the age of collectors continues to climb, it seems inevitable that even more people will shy away from small coins; if only because they will have trouble seeing them.

These popularity factors are just a few of the reasons why certain coins are popular and others are not. If you ask many collectors why they specialize in a certain area, the reason may be hard to determine. Often, these individuals collect "what they like" and there is no clearly definable reason; it's just a gut instinct that, say, tells them that they should focus on Proof gold dollars or Gem Saints. And that's the beauty of rare coin collecting.

Smart Collecting 101: Avoiding the Churn

When talking to collectors, I often find myself giving them advice as to what makes a "good collector." I thought it would be interesting to share some of my thoughts and observations in a series of blogs entitled "Smart Collecting 101." These will run, from time to time, over the next few months. One of the mistakes that many collectors make is allowing themselves to be "churned;" either by their dealer/adviser or by themselves. Churning is an expression that means too much buying and selling from an account (or in this case a collection) by a salesperson in order to generate profits for the company and commissions for the broker.

Many of the big marketing firms in the coin business (and some of the better known boutique retail firms) are notorious churners. They will sell a collector a coin and then, a few months later, encourage him to upgrade it.

What many new (and even old) collectors fail to realize is that there are hidden transaction costs involved in any numismatic transaction. Most collectors who deal with the larger marketing firms are paying at least 20% over cost and in many cases more. Now this isn't meant to imply that a 20% or 30% markup is unfair; it's not. But what the collector needs to understand is that the market has to rise at least 20-30% in a short period of time in order to break even on a transaction.

And this fails to take into account another hidden cost: selling. A firm that churns isn't expecting to take back a coin at a price level in which they can break even. Typically, though, they will mask this in a cunning way.

Let's say a dealer sells a coin for $10,000 and his cost is $8,500. And let's say that the current wholesale value for the coin is still around $8,500. What a clever salesperson might do to churn a client is to tell him that his coin is now worth $12,000 or $2,000 over the collector's cost. The salesperson has a coin in stock that represents an upgrade. It's worth $15,000 on a wholesale basis. He charges $19,000. He knows he will lose money on the trade-in but he is selling the new coin for enough of a profit that he is still able to generate a healthy profit. There is nothing really "wrong" with this but what it means is that the collector now has a new $15,000 coin that he is way upside-down on as opposed to an old $10,000 coin that he is only slightly upside down.

Not all churning is the result of sleazy or even "aggressive" dealers. Much of it is self-imposed by collectors.

One of the pieces of advice I try to give to new collectors is that they should "but the right coin the first time." What this means is that instead of impulsively rushing through a set of, say, Dahlonega quarter eagles an then upgrading their mistakes as they go along, they should take their time and buy the coin they will want in their set for the long term the first time.

Of course there are exceptions to this rule. You might have bought a great AU55 1854-D quarter eagle that has pretty natural color and surfaces as well as a great strike. But a few years later, a really superb MS61 becomes available; a coin with an even better strike, a nice pedigree and fantastic coloration. In this case, an upgrade might be a very smart move.

My feeling is that there are clearly times when an upgrade does make sense. Obviously, it is sensible if there is not much of an increase in price. As an example, if you bought a coin in your set for $2,000 and you are able to significantly improve it for $3,000, that's a no-brainer. Or, you might have a coin that you paid $5,000 for a number of years ago that's worth $9,000 today. An upgrade costs you $11,000; you can roll your profit into the new coin and downcost it to $7,000. (Yes, that's how coin dealers think...)

Sometimes, new collectors start a set tentatively and are not ready to spend $10,000 or $20,000 per coin; say on the aforementioned Dahlonega quarter eagles. Their comfort level to begin with is $2,000 or $3,000. This is understandable but my advice in this situation is to not rush headlong into the set. I have seen many great collectors start with small steps and grow into buyers of serious Condition Census-level pieces after they become more sure of themselves and more comfortable with the dealer they are working with.

Even if you are not working on a specific set, you can still get caught-up in the World of Churn. I've talked to a number of collectors over the years who have had their entire "portfolio" changed around by their expert adviser a number of times. And some of the changes that they made were ill-advised to say the least. As an example, I recall talking to a man who had owned some fantastic coins like a Gem Proof Stella, a high grade High Relief and a sensational 1907 Wire Edge eagle. He had bought them at a low point in the coin market, held them for a few years and was in a great long-term position. The salesman at the firm he was working traded him out of these great coins not once but three times over the course of five years and had taken what would have been a small but superb group worth around $1 million and turned it into a bunch of mediocre, overgraded swill that would have been hard to liquidate at half that amount.

I think one of the best signs of a good, reputable dealer is the individual who tells you "no" from time to time. This is a dealer who is interested in a good long-term relationship but will tell you that a coin he has in stock that is a small upgrade over the one you currently own just isn't worth spending a few thousand dollars on. Desperate dealers always say "yes." Stable, dependable dealers sometimes say "no."

In closing, I'd like to ask you, as a collector, for some suggestions about topics for future editions of Smart Collecting 101. What questions do you about collecting that you'd like answered? Feel free to email me at dwn@ont.com with your questions, comments, etc.