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Your Focus: "Caveat Emptor" is an expression
worthy of your attention. It means "Let the buyer beware." Pay attention when
you buy coins. Deal with facts not fiction. Search for good value in the coins you buy.
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The basis of a successful coin purchase probably has more to do with what
you know than whatever hard-nosed negotiating skills you may possess. The profitability of
a coin investment may have more to do with patience and recognizing solid fundamental
values than how fast you are on your feet trying to catch price swings in the marketplace.
What follows are six easy-to-understand but rarely practiced "caveats" that are
particularly useful if you have an interest in buying hard-to-find coins.
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RULE NUMBER ONE:
Generally there are no
bargains. One exception might be when you are buying a coin from someone who simply
doesn't have the knowledge to appreciate what he or she is selling. If you are buying from
someone who specializes in the area of concern, it's likely the only way a bargain will
surface is if the seller makes a mistake. That can happen, but not very often. Another way
to think about this rule is: you are most likely to get exactly what you pay for, nothing
more. It is amazing how many collectors spend years buying coins at so-called
"bargain" prices only to discover differently when it is time to sell. Unless
you already have a good deal of experience buying coins, pay attention to rule number one!
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RULE NUMBER
TWO:
Always challenge rare coin facts, especially
those offered by the seller. Few people bother to do their homework before buying rare
coins. Too readily they accept whatever information the seller offers without asking a
single challenging question. How was the information the seller offers without asking a
single challenging question. How was the information determined? Does it represent a
consensus view of acknowledged experts or is it just the biased view of the seller? Be
especially sensitive to coins touted as "finest known," "unique" or
something similar. Just because a seller may have more knowledge than yourself in a
particular area does not necessarily make that person an expert. Can the claim be
substantiated? Would other experts agree? Should "finest known" really be
interpreted as "The best I have seen?" There can be an enormous difference
between the two. If a coin is really in the "finest known" category,
no doubt
it should command a special price premium. Before you pay it, do your homework and
substantiate it. If you're not qualified, hire an independent consultant to do it for you.
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RULE NUMBER
THREE:
Don't make special allowances when grading
condition-rare or key date coins. Many collectors and dealers eagerly give lip service to
this statement but often fail to practice what they preach when they have such a coin for
sale. When grading key date coins such as a 1945 silver dollar, pretend the date is that
of the most common date in the series such as a 1962 silver dollar. When grading
condition-rare coins, particularly those that are uncirculated and which have an
attractive natural tone, do not be fooled by the added appeal of the toning. Grade the
coins as if it were brilliant. Look beneath the toning for problems that may be hidden
from a cursory inspection. Technically the toning plays no part in the coin's grade. It
can however have an influence in pricing the coin but only as an add-on after the grade
has been established.
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RULE NUMBER
FOUR:
The value of a scarce coin is determined by
what a willing and knowledgeable buyer will pay a willing and knowledgeable seller. Beyond
this there is no such thing as a "right" value. There are times when certain
rare coins have no willing buyers, particularly for very expensive coins priced in the
many thousands of dollars. This does not mean such a coin will have an unlimited value
when it eventually does appear for sale. Rare coins turn over far less frequently than
very common "commodity-like" items.
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RULE NUMBER
FIVE:
Knowledgeable collectors of scarce to rare
coins probably make the best long-term investors because of their greater understanding of
true coin values. Not only is their specialized knowledge important when ferreting out
solid value but it fulfills the first requirement of every investor, that is, to
understand what you are investing in. Most investors usually participate in the
marketplace during the frenzied times when prices are rising, act on poor information or
hype, and are too anxious to turn a quick profit. Long-term collectors buy after prices
have stabilized at a bottom when once again solid value is offered, are able to sort out
fact from fiction, and have the patience to wait to sell and get what their coin is worth
(profit included) even if that wait involves years. The key to the success of the
collector as an investor is that during those long years between the buy and sell, the
coin is enjoyed for what it is. The pure investor, when stuck with the long waif, doesn't
know how to enjoy the investment and often sells prematurely and at a loss.
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RULE NUMBER
SIX:
Pay attention to rules number one to five. If
you don't understand them, ask for help before you start your coin buying program. As a
final thought remember, "Knowledge is King." Make a point of collecting it too!
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