Graded Coins: Worthy Investment Or Waste Of Money?

Coin grading is a systematic process used to evaluate and assign a standardised grade to a coin based on its condition, wear, and overall state of preservation. The primary purpose of coin grading is to provide a universally accepted and consistent way to communicate a coin's quality and rarity. This is done using the internationally recognised Sheldon scale, which assigns a coin a grade of 1–70 based on its condition. A coin with a higher grade is typically worth more.

Graded coins are appealing to buyers because they are easier to sell, and the certification from reputable grading services assures authenticity and accuracy in assessing a coin's grade. However, not all graded coins are worth more than ungraded coins, and the decision to grade a coin should be weighed against the associated costs and individual preferences.

Graded coins can be a good investment if they are rare and in high demand, but it's important to do your research beforehand and be aware of the potential risks and uncertainties involved in the process.

The pros of buying graded coins

Coin certification is a relatively recent addition to the coin collector's arsenal. It can provide plenty of advantages over housing your coins in their original mint packaging. Here are some of the pros of buying graded coins:

• Authenticity and quality assurance: Third-party grading services hire expert numismatists to examine every coin for its originality and provide their expert opinion on the coin's overall grade. This signals to collectors that a coin expert has already examined the coin and determined that it is legitimate. Given the prevalence of fake coins and counterfeits, this alone can potentially increase the coin's value.
• Increased demand and value: Graded coins are in high demand, especially those in the 60–70 range. The highest-graded coins within any type can fetch spectacular prices at auction.
• High-quality protection: Graded coins are typically encased in slabs, which are plastic holders that provide some of the best and most durable protection money can buy.
• Ease of transaction: Graded coins give buyers and sellers the added confidence to conclude a transaction, as both parties can comfortably agree on the value of the coin.
• Increased liquidity: Graded coins are easier to sell and are in demand, so you don't have to worry about your money being tied up for long periods.
• Identity and information: Grading companies have vast databases of each coin they grade, so you can find out the exact specifications of a particular coin, as well as how many coins have been assigned to certain grades.
• Long-term storage: The holders are sonically sealed and provide effective long-term storage for your coin. When placed in a cool, dry place, they offer almost 100% protection.
• Storage and display: Graded coins offer a useful way to store, protect, organise and display your coins. They can be stored in specialised coin storage boxes designed to be compact and functional.

The cons of buying graded coins

While graded coins have their advantages, there are also several drawbacks to consider before making a purchase. Here are some of the main disadvantages of buying graded coins:

Costly: Grading coins can be expensive, with prices ranging from $30 to over $300 per coin, depending on various factors such as the grading company, the category of the coin, and its expected value. There may also be additional handling and shipping fees, further increasing the overall cost.

No guarantee of a good grade: There is no assurance that a graded coin will receive a high grade or that its value will increase as a result of the grading process. The outcome is uncertain, and the risk involved in transporting the coin to the grader and potential damage during the grading process should be carefully considered.

Restrictions and limited visibility: Some collectors dislike the plastic holders used to encase graded coins as they restrict the ability to view all angles of the coin, especially the edges. This can be a significant drawback when certain details hidden by the holder play a crucial role in determining the coin's value.

Uncertainty about provenance and history: Even with a graded coin, there is no guarantee about the province or history of the coin. To be certain that a coin has not been stolen, it is advisable to purchase directly from a mint.

Changing standards: When grading standards change, previously graded coins may need to be regraded, potentially resulting in over-graded or under-graded coins. This can be a cumbersome and costly process.

Missed opportunities: The plastic holders used for graded coins may sometimes obscure essential details that are critical in determining the coin's value. This can lead to missed opportunities for buyers or sellers who rely solely on the assigned grade without considering the hidden aspects.

How to grade a coin yourself

Coin grading is a complex and skilled process that requires a good deal of knowledge and experience. However, with the right tools and approach, you can learn to assess a coin's grade more confidently. Here's a step-by-step guide to help you get started:

Get the Right Equipment:

• Magnifying Glass: Invest in a good magnifying glass with at least 3x to 7x magnification. This will allow you to examine the coin's details up close.
• Coin Grading Book: Obtain a comprehensive book on coin grading, such as the "Official ANA Grading Standards for United States Coins" by Kenneth Bressett. This will provide you with the official grading standards and help you understand the different grades.

Understand the Grading System:

• Learn the Grades: Familiarize yourself with the different grades used in coin grading, such as Poor (P), Fair (F), About Good (AG), Good (G), Very Good (VG), Fine (F), Very Fine (VF), Extremely Fine (XF), About Uncirculated (AU), Uncirculated (U), Choice Uncirculated (CU), and Gem Uncirculated (GU). Each grade has specific criteria based on the coin's condition.
• Study the ANA Scale: The American Numismatic Association (ANA) developed a 70-point scale to create more specific and universal standards. Grades 1-15 are for heavily worn coins, 20-45 for lightly worn coins, 50-58 for coins with very little wear, and 60-70 for coins in Mint State with no signs of wear.

Practice and Compare:

• Sample Coin: Find a sample coin that has already been graded by professionals. Study this coin with your magnifying glass to familiarize yourself with the characteristics of that particular grade.
• Practice with Multiple Coins: The more you practice, the better you'll become at grading. Attend coin dealerships or shows to examine a variety of coins and ask fellow collectors for their insights.
• Compare with Photographs: Compare your coins to photographs of coins at different grading levels. You can find these photos online, in books, or by asking dealers for reference images.

Examine the Coin's Condition:

• Lighting and Handling: Hold the coin by its rim under good lighting, carefully turning it to observe light reflection. Avoid holding it between your fingers to prevent leaving fingerprints.
• Wear and Damage: Look for any signs of wear, damage, or scratches on the coin's surface, especially on the high points where wear is more likely to occur.
• Magnification: Use your magnifying glass to inspect the coin for subtle imperfections that may not be visible to the naked eye.
• Reference Grading Guides: Cross-reference your observations with reputable coin grading guides or online resources to ensure a more accurate assessment.

Assign a Grade:

Based on your examination and comparison, assign a grade to your coin. It doesn't have to be exact, but try to estimate its grade within a range (e.g., Poor, Fair, Good, etc.). This will help you determine whether it's worth pursuing a professional grade or not.

Remember, coin grading is a skill that improves with practice and experience. By following these steps and studying graded coins, you'll develop a better eye for assessing the condition and grade of your numismatic treasures.

Where to get coins graded

There are several options for getting your coins graded. The first step is to estimate the coin's grade yourself. This will help you determine whether it's worth paying for a professional grading service. You can do this by purchasing a magnifying glass and a book that provides coin grades and pictures, such as the "Official ANA Grading Standards for United States Coins" by Kenneth Bressett. You can then compare your coins to photographs of graded coins online or in a book.

If you think your coin is valuable, you can use a third-party certification and grading service such as the Professional Coin Grading Service (PCGS) or Numismatic Guaranty Corporation (NGC). These services grade, authenticate, certify, and seal coins in a protective display for a small fee. To use these services, you'll need to become a member, which costs between $39 and $249 per year, depending on the membership level. You can then submit your coins online or in person at a trade show. The turnaround time is typically up to a month, but express options are available.

Alternatively, you can find a reputable local coin dealer who is affiliated with the American Numismatic Association (ANA), PCGS, or NGC. These organisations can help you find a dealer in your area. The dealer will be able to send your coins to PCGS or NGC for grading, but you'll need to pay their fees as well as the dealer's fee.

How to spot a fake coin and grading company

Coin grading is a complex and important skill in the world of rare coin dealing. The quality of a rare coin is the single greatest factor that impacts its value. Many companies offer coin grading and certification services, but not all are legitimate. Some companies are considered less precise in their standards and may even inflate the grades of their coins. Therefore, it is important to be able to spot a fake coin and a fake grading company.

• Check for casting seams, which are often apparent to the naked eye.
• Fake coins often contain hole markings.
• Pay close attention to mintmarks and research the common marks and designs that should be present on the coin.
• Compare the relief of the coin to others in the series by stacking them. If the coin is fake, it may be too high or too low, and the stack could topple over.
• Gold and silver are not magnetic, so if a magnet sticks to your coin, it is likely a fraud.
• Silver is a conductor of heat and will immediately begin melting an ice cube.
• Check the size and weight of the coin against the standard for its type. Fake gold coins containing other metals will be larger than pure gold coins of equal weight.
• Genuine gold makes a sharp, high-pitched ringing sound when struck against a hard surface or another gold coin.
• Check for discoloration or particular hallmarks with a magnifying glass. For example, genuine gold is a soft yellow colour and not very shiny.
• Place the coin in a bowl of water. If it is genuine, it will sink to the bottom.

Some ways to spot a fake grading company:

• Check if the company is known for inflating the grades of their coins.
• Check if the company ignores certain grading criteria addressed by major companies, such as cleaning or environmental damage.
• Check if dealers are reluctant to purchase coins certified by the company in question.
• Check if the company is lesser-known, off-brand, or non-mainstream.

Some examples of "gold-standard" grading companies include PCGS, NGC, and ANACS.

Frequently asked questions