As we approach the millenium, there is more and more noise about coins and precious metals as an investment. The Y2K computer bug fuels this marketing ploy.

There are some particularly bad SPAM e-mails about Gold and Silver as investments against the uncertain future. One thing can be said, I'll bet the price of gold and silver will fluctuate substantially in 1999. Whether it ends up or down in the end is anyone's guess. The brokers will all make money, just as they did in 1982 when bullion when crazy. As for me and mine, I'll be keeping most of my money in the bank  (or more likely, buying burritos and paying rent with it).

In general, coins do not make a very good investment medium. Solid collector coins (Such as VF coins from the 1700-1800s other than Morgan dollars) do retain their value quite well, and gain a bit of value hedging against inflation. Date rarity is more important than condition rarity to maintaining value. If you expect heavy inflation, these kinds of coins can keep you from losing money about as effectively as a good savings account, savings bonds or Treasury bonds. Remember though, that there may be substantial brokerage fees between buying and selling coins that can really eat into this (See Channels for Selling Coins and Channels for Buying Coins for the gory details.)

Ultra-high grade or ultra-rare coins in the $20,000+ range (and some cheaper silver dollars) are termed "investor" coins. That's because they fluctuate in price more frequently than those coins with a substantial long-term collector basis for true value. Some people have made a lot of money on this stuff. Mostly coin dealers. Condition rarity can also put a coin into the "investor" realm. Be very careful about ultra-high grade (MS-68+) modern coinage, it can go up and down rapidly as well.

To put it into language that can be understood by investors. If stocks were coins:

Yahoo! - would be an MS-69 Washington Quarter or a DCAM Proof 68 Franklin Half.
Phillip Morris - would be a 1798 Bust Dollar or a VF 1895 O Barber dime.
Microsoft - would be a 1916-D Mercury Dime or a 1909 S-VDB Lincoln Cent.

If you don't know a heck of a lot about coins, you will probably lose money investing in the rare coin market. Stick with more traditional investment mediums until you know more about the rare coin market.

One of my favorite books about investing in coins is "The Mercenary's Guide to the Rare Coin Market" by David Hall (curiously enough, it is now out of print ;-). Now, David Hall was the founder of PCGS. The book was all about getting coins certified in very high grade. I'm sure *he* made a LOT of money off of the book as the owner of the place that certifies coins. It contained a whole lot of really bad advice (although I really liked the cover, Dave is holding a tommy gun with some attractive female assistants sitting on a pile of gold and money). Using the book, one could have lost millions of dollars quite easily. Interestingly enough, the one Lincoln Cent he advised against (the 1922 Plain) has gone up the most. So if David Hall can't figure out what the rare coin market is going to do, I'd bet you can't either.

My advice is to collect coins for fun. Learn about them. Never buy an expensive coin you don't know a heck of a lot about. Don't buy coins over the phone. Don't buy coins from advertisements you get in the mail with your bills. Finally, be wary of coin and bullion dealers who hock their wares as a "good investment".

If you learn a lot about coins, and exercise good judgement, then you probably won't lose too much money enjoying the Hobby of Kings.

Knowledge is King.