Building a Type Set as a Rare Coin Investment Strategy
In general, segments of the coin market appreciate together, rather than by specific coin issues that pull away from the rest of the pack – such as 1909-S VDB Lincoln cents, 1889-CC Morgan silver dollars or 1911-D $2.50 gold coins, for example. Instead, during various time periods, the coin market sees demand and prices escalate by series or market segment, like for high-end Mint State Morgan silver dollars, MS 64 and higher $20 Saint-Gaudens gold coins or high-grade “Barber” design coinage, for example.
But nobody knows when such collecting and investing trends will be popular among buyers in the coin market. However, sometimes newsletter writers promote particular coin types that are easy to find, like MS 64 $20 Saint-Gaudens gold coins or common date MS 65 Carson City Morgan dollars, and they become sought after in the market and their prices rise because of these promotions. At other times economic inflationary forces cause investors to buy rare coins as an inflation hedge, moving the whole market skyward for “investment quality” coins.
Presently, most people who purchase and invest in rare coins expect that scenario to take hold in the economy and coin market at any time, however, the window of opportunity on the buying side has grown because inflation has remained relatively low for the time being. But, judging from the inflation boost the coin market got back in the inflationary 1970s, when buyers begin knocking down the doors, prices for rare coins will begin skyrocketing very quickly – within weeks and months.
However, it’s almost impossible to predict when. Therefore, it may be a good idea to think of buying and holding rare coins for about a ten year period. This allows for market cycles to do their thing and time for collector/investors to build their collections. Because nobody knows what collecting trends will be in vogue, by building a “type set” you can cover the various coin series all across the board and tailor a collection/investment to your personal investing budget, whether several thousand dollars or millions.
A “type set” is a collection of the various design types of each denomination. For example, for silver dollars a type set includes at least one example of each of the following design types: Draped Bust dollar with Small Eagle Reverse (1795-1798); Draped Bust dollar with Heraldic Eagle Reverse (1798-1804); Gobrecht dollar (1836-1839); Seated Liberty dollar (1840-1873); Morgan dollar (1878-1921); Peace dollar (1921-1935); plus the modern dollars, beginning with the Eisenhower dollar (1971-1978), if you wish to include modern coins. For gold coins you can begin by building a collection/investment of $1, $2.50, $5, $10 and $20 coins of both the Liberty design type and the Indian design type (including the Saint-Gaudens $20), then move back to the Capped Bust and Classic design gold coins (1795-1838), as well as including the $3 gold (1854-1889), and possibly the much higher-priced $4 gold Stella (1879-1880).
There are various ways in which to plan a type set. Some people limit their collection to just silver or gold coins, excluding copper and nickel coins. Others include both circulation and proof strike coins, some just one or the other. More advanced collectors include varieties, such as “No Motto” and “With Motto” examples. Some well-healed people collect the finest examples they can find, often upgrading along the way, others might limit their collection/investment to AU-58 grade coins, that are attractive looking but have just a touch of friction on their high points, for example. Other themes are also practical, such as the first year of issue, key issues of each series, or just common affordable examples of each series that are pleasing to look at.
There are almost unlimited ways in which to build design type collections and investment portfolios. A great place from which to get ideas and to begin is by browsing through A Guide Book of United States Coins, also famously known as the “Redbook,” which has been published by Whitman Publishing, since 1946, with a cover date of 1947. In fact, many collector/investors embark on building “Redbook” type sets.
If you’re a seasoned rare coin collector/investor you may feel comfortable building your own type set and will probably have the additional benefit of having fun while you invest. However, coin investing is not all just black and white as in buying a coin with a grade on a grading service holder and looking a price up in a price guide. There are nuances to be cognizant of, such as which coin grading services to put your faith in, striking and toning characteristics of the coins, price variations, etc.
Therefore, it is recommended that you find a competent coin dealer to work with for the long-haul. He/she will get to know you and your buying preferences over the years, can counsel you as you build your collection/investment, and help you buy, upgrade and eventually sell your coins. You’ll have fun in the process, make new friends, and hopefully profit handsomely if you’re careful and the market and economy cooperate.