Every once in a while, you hear about the virtues of investing in rare coins.  The articles will tell us about the 1933 Double Eagle, a 20-dollar gold coin that was minted in 1933 during the Great Depression.  If your grandfather saved one of the 13 known specimens, then you have an item that has sold at auction for nearly $19 million.  A 1913 Liberty Head nickel recently sold for $4.2 million.  A 1943-D bronze penny is potentially worth $1.7 million.

So, this is the road to riches, right?  Actually, there are some roadblocks to turning ordinary currency into capital gains.  One is the problem with a coin’s condition, which generally refers to how new and shiny it looks.  The MS/PF system, the most widely used, lists grades from 1-70.  A 70 grade is basically mint condition, which means it has never been in circulation and was ‘sharply struck,’ meaning the mint did an exceptional job of creating the coin in the first place.  A coin with a 60 grade was weakly or averagely struck but is still in mint condition.  Go down to a 10 grade, and you’re looking at the coins in your pocket or purse, which have experienced a lot of wear and tear.  

The roadblock here is that most of us would not know a 50 from a 40 from a 70.  A coin dealer might tell you that he’s selling you a 60 and a prospective buyer, down the road when it’s time to cash in your riches, will tell you that you’re peddling a 40 grade coin.  There are somewhat reliable grading services—Professional Coin Grading Service is considered the best—but a dealer might claim a high PCGS grade on a coin—and how would you know?  Beyond that, grading is not an exact science; the grade and certificate represent opinions, and grading standards can vary over time.  Meanwhile, one has to add the grading fee and auction service fees into the costs of owning what is basically a passive asset that is unlikely to generate dividends.  

But you might still want to check your grandparents’ attic.

This article was written by an independent writer for Brewster Financial Planning LLC and is not intended as individualized legal or investment advice.