Are Coins a Good Investment?

As children, we like to collect things, including coins. We see everything as valuable. How many coins did you pick up off the ground when you were younger?

While many of the coins we found as children aren't particularly valuable, there are some that could be valuable -- and may even be considered investments. However, as with all investments, you need to understand what you are paying for and realize that there is a chance that things won't work out quite as you thought.

What Makes Coins Valuable?

There are stories of coins that sell for thousands of dollars at auction, as well as stories of gold and silver coins that have the potential to rise in value as precious metals rise in price. Some coins, like those created by the United States Mint, Royal Canadian Mint, and other mints, are meant to be collector's items. Limited numbers and the materials used can make them valuable over time.

If you are interested in collecting coins and hope they increase in value, here are some things to look for:

• Age: First of all, consider the age of the coin. Examples of ancient coins from earlier historical eras are more valuable than coins produced today. Part of that has to do with the metals used to create them, but it also has to do with historical value.
• Rarity: The harder something is to find, the more valuable it is. There are a number of old Roman coins made of common metals that can be found in many places throughout the United Kingdom. Some of these old coins aren't as valuable as rarer gold coins from Ancient Persia or Macedonia. Even modern coins can be quite valuable if they are rare, such as misstruck coins that make it into circulation, or coins struck at mints that are no longer in operation.
• Metal amount: Another consideration is metal amount and purity. U.S. pennies minted before 1983 are mostly made from copper; newer pennies are mainly composed of zinc and less valuable to collectors. Earlier U.S. quarters contain silver. You can get gold and silver coins from the Royal Canadian Mint, and save them. If gold and silver rise in price, you can sell the coins later at a premium. Coins made from gold and silver are often worth more than their face value.

For the most part, collecting coins is likely to be more of a hobby than an investment, since it can be difficult and expensive to acquire coins that are especially rare or old. You might happen upon a find in the course of collecting coins on an ordinary basis, but actively purchasing coins can be risky. You need to trust their authentication, as well as run the risk that they might not rise much further in value over time.

Buying Gold and Silver Coins as Investments

Some investors prefer to purchase gold and silver coins from trusted government mints around the world. This can be a good move if you believe that gold and silver will climb in value. However, when you purchase these coins, you will pay closer to the market value -- and maybe a premium besides -- rather than the face value.

For example, if you purchase a 50-cent coin with 1/25 ounce pure gold commemorating the 150th anniversary of Quebec and Charlottetown conferences, you will pay $129.95 at the Royal Canadian Mint. That's many times the face value of the coin.

You can also purchase pure platinum coins from mints. The one-ounce platinum coins offered by the Royal Canadian Mint cost almost $3,000 to purchase, but the face value might be $300.

While it helps you to diversify, if you plan to buy these coins as investments, you need to believe that the precious metals in them will continue to rise in value in the coming decades -- and you do run a risk. A one-ounce Gold Maple Leaf coin bought on the Royal Canadian Mint site might run you more than $2,000, but right now you can find these coins on eBay for closer to $1,200 to $1,300.

Like any investment, you need to consider the possibility of loss when you buy coins for their investment value. You should also consider how much the value can increase from current levels, as well as whether or not you will actually be able to sell at a later date.