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How to Make Money Collecting Coins
1909-S VDB Penny
Coin grading knowledge is imperative
Collecting coins is so much more than just buying and displaying them (or worse keeping them hidden in a box somewhere). As an avid metal detecting hobbyist, and coin collector, I often waffle between the desire to keep my finds as collectibles, or turn them in for cash - especially with the spot price of silver as it is today ($1.50 for a pre-1965 silver dime!). So what is the best way to make money collecting coins? Simple - knowledge of the different aspects of collecting and what makes certain coins more valuable than others, and how to leverage this knowledge when purchasing coins from dealers or other sellers.
Like any other collectible market, coin prices are, in general, governed by condition (grade) and scarcity - with some exceptions. In addition to these attributes, many coins also have intrinsic value based on the type of metal they are made of. For coins made of gold or silver alloys, the current spot price for these precious metals determines the base value for the coin. Therefore if you were to go to a dealer for purchase, the minimum price you would pay for a coin is the current sell price for the precious metal quantity in the coin, plus whatever premium might exist for numismatic value (condition and scarcity). This base price will fluctuate with market values at a much wilder rate than any added numismatic premium, which should fall more in line with inflation and reported scarcity numbers. If you don't want to mess around with the precious metals market, stick to base metals coins to start - such as pennies and nickles.
That said, my intent is to focus on the scarcity and condition (grade) to assist in making your decision. Your first step is to purchase a coin price guide (red book or similar) and a guide to grading coins. Once you have the price guide, get a piece of paper, or start a spreadsheet listing the scarce dates in the series you intend on collecting. For the beginner, I recommend starting with post civil war nickles and pennies, which includes some very nice specimens. So, for example if you choose to start with Lincoln cents, you would make note of all the "good" dates - including 1909-S, 1909-S VDB, S mints from the teens, 1914-D, 1931-S and so on. Commit these dates to memory, and start looking at some specimens on Ebay for sale, just to get an idea of what you are up against in price.
Next, you'll need to learn how to grade coins. Grading coins is more of art than a science, and small details make the difference between a couple hundred and a couple thousand dollars. The only way to learn the art of grading is to grab a book on the subject and sit down with a pile of coins. Since grading is a subjective analysis, it will take a good amount of time to become decent at it - and you should NEVER buy coins until you understand grading!
See this Page - Grading Coins - for a wonderful analysis of the topic.
Ok - so the reason you clicked here was to find out how to make money collecting coins, right? Well, the key to making money is to ALWAYS, ALWAYS, ALWAYS under-grade the coin when buying! For example, if YOU think it's an XF-45, you should always buy from the perspective that it's an XF-40, or even lower. Keep in mind that this only hold true for coins that are NOT professionally graded (I avoid all professionally "slabbed" coins). Locate the dealer graded coins in the case, use your own magnifier and examine the coins thoroughly. It's not uncommon to find coins that have been subjectively under-graded in your opinion, particularly among marginal key dates. These are the coins to buy without hesitation. Once you get good enough at it, you can try to argue down condition on some of the marginally graded coins that appear to be over-graded by the dealer, but you may have less success with that!
What about coins on Ebay or other coin trading sites? They say a picture is worth a thousand words, but it can also cost you thousands of dollars if you get the grade of the coin wrong - and that goes both directions. My advice is that if the picture is not absolutely clear, and can be zoomed in, to the point where you can visually determine the high points of the coin - pass on it, unless the going price is at least two main grade levels lower than what you perceive it to be. As there is high degree of fraud on EBay and elsewhere, make sure you save a copy of the picture of the coin, so you can do a comparison when it arrives. If your just starting out, I would avoid buying online, or stick to dedicated coin trading sites (keeping in mind you're less likely to get a great deal there!).
That's it, in a nutshell - make money collecting coins by becoming proficient in coin grading and buying under-graded coins. This is a great way to get started, and help you build the most important of all coin collecting skills. Of course there are many other ways to make money collecting coins, including cherry picking coin varieties, coin roll hunting, searching for error coins and of course digging them up for free! Perhaps I will cover some of those topics in the future!