My friend Jim Halperin – who in his spare time knocked off a couple of futuristic cyber best-sellers,just to make it look easy – co-owns HeritageCoins. It’s billed as ‘the world’s largest coin dealer and auctioneer.’ Yet he started a personal coin collection this year for the first time in his 33-year numismatic career. (Like a bartender who finally starts drinking.)

Here’s why:

1. Two years ago, America had 2 million coin collectors (down from 6 million in 1980). Today there are 60 million. Thanks to the 50-state quarters — those funny-looking coins you’re starting to see in your pocket change — the number of coin collectors in the U.S. has risen 30-fold. That’s more than 10 times as many collectors as has ever existed in our nation’s history.

For the first time in 25 years, you can assemble an interesting and challenging collection of coins just by checking the change you get from the Coke machine. The 50 different designs comprise by far the most diverse array of circulating coins the U.S. has ever produced.

Sure, the new collectors are mostly teenage and younger, with limited disposable income – they’re collecting new quarters, after all, not something Caesar minted – but Jim looks on that as a plus. ‘It means prices have not yet risen,’ he says. ‘But prices inevitably will rise within the next 5-10 years, once even a small percentage of these teenagers become well off and begin collecting coins on a more serious scale (just as I currently collect the comic books I most enjoyed reading as a kid, though they now cost real money).’

2. Coins have underperformed most traditional investments over the past 20 years, during which the collector base shrank from about 5-6 million in 1980 to about 2 million in 1998 before the state quarters were issued. Prices only rose about 20% in 1999, and were flat in 2000. (Gold coins were actually down as much as 25-30%, Jim says, but other coins rose somewhat to makeup for it.) Meanwhile, most other collectibles skyrocketed and coin collecting’s base mushroomed. There are two reasons coins lagged behind, Jim says, both temporary:

  • A lot of people bought generic gold and silver coins, often to the exclusion of other rare coins, in 1998-9 in preparation for a Y2K meltdown, which, of course, did not occur. Many of those buyers dumped these coins back on the wholesale market after the world failed to end, bloating dealer inventories and throwing the supply/demand ratio out of whack.
  • The $100 million S.S. Central America shipwreck hoard,recovered in the mid-1980s, finally cleared the court system and was marketed this past year. That’s a lot of new inventory to dump on the market. And,says Jim, the Harry Bass collection of U.S. gold coins was sold at auction in 1999-2000, sucking an additional $37 million out of the market. This may well be the last of the great old-time collections (mostly assembled prior to 1980)ever sold, and there appear to be no other major auctions of that caliber on the horizon.

Jim thinks coin prices will be a lot higher five years from now than they are today. But, he cautions, never buy coins as a pure investment. Coins do tend to grow in value over time, but they produce no income,and are best purchased by those who have some appreciation for their history and beauty, and who have a specific collecting goal. They can also be bought as a hedge, since their prices do not seem to track stock prices at all and may even be counter cyclical to stocks. But even then, coins should comprise no more than about 5-10% of the total portfolio and should be thought of as an insurance policy rather than a core holding, Jim suggests.

Don’t order rare coins from mail-order ads or telemarketers, says Jim. Even the reputable rare coin investment retailers often have markups of 35-50% over wholesale, and will generally recommend coins that are easiest for them to buy or that their suppliers want to get rid of, rather than those coins that are likely to increase in value. (Heritage, says Jim, prices most of the rare coins it lists on its website at 8% to 12% over wholesale, and you can often buy them for even less by bidding in its auctions.’More important than that, the very freshest coins in the marketplace — the ones that the serious collectors are looking for — get listed on our website first, before they are ever offered to dealers.’)

‘Learn as much as you can before you buy anything significant,’ Jim advises. ‘Decide on an area that appeals to you and that you are likely to want to learn more about. Read numismatic books (especially A Guide Book of U.S. Coins). Join theAmerican Numismatic Association and read its monthly magazine, The Numismatist. The more you know, the better you will do.

‘If you already have a coin collection and are interested in the best tax strategy for selling, bequeathing or donating it, check out a book we recently published entitled The Rare Coin Estate Handbook. And if you’re a knowledgeable collector who knows the grades of his or her coins, Heritage also has a free online computer program called MyCollection,where you can input a list of your holdings, and the estimated value of each coin in your collection is calculated updated daily based on actual market transactions.’

Thus endeth the plug for my pal Jim. I do not collect coins myself and will not start after writing this column. But I like buying things when they’re at the bottom of a cycle, and I like the notion of tens of millions of new coin collectors, sifting through their change for quarters (Pennsylvania and Delaware quarters already fetch a significant premium over face value in the wholesale market, Jim says) and eventually buoying the whole market.

So as between coin collecting and skiing, let’s say – two reasonably expensive avocations – I’d take up coin collecting. Although the folks you meet on the slopes, I’m guessing, are likely to have an even healthier glow than the ones you meet at coin shows.


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