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The Importance of Learning to Grade Coins
By: Jeff Garrett
Third-party grading (coins grading by someone other than the buyer or seller) has been around for over forty years. The American Numismatic Association (ANA) started grading and authenticating coins in the 1970’s, but without the encapsulation we are all familiar with today. The coins were graded by their team of experts and were accompanied by a certificate attesting to the authenticity and grade of the coin. The service was popular, but only sparingly used by dealers and collectors of the day. Uncertified coins continued to be the norm when great collections were sold at auction or through retail channels. For the most part, coin grading standards were based on trust and were certainly not always consistent.
The Birth of Coin Grading
In 1986, a group of about ten rare coin dealers launched an innovative concept to not only certify a coin’s grade and authenticity, but to encapsulate the coin to ensure its integrity. The creation of the Professional Coin Grading Service (PCGS) would forever change the numismatic landscape. The original dealer group then placed sight unseen bids for any coin graded by PCGS. This immediately gave rare coins a level of liquidity that was unimaginable prior to this innovation. The Numismatic Guaranty Corporation (NGC), now know as the Numismatic Guaranty Company, was formed by one of the original dealer associates the following year. The rare coin market fully embraced third-party certification and has never looked back.
Over 100 million rare coins have been graded by PCGS and NGC over the last forty years. Nearly every rare U.S. coin worth over $500 has been graded and encapsulated by one of the two companies.
Why You Need To Learn About Coin Grading to be a Successful Collector
Based on the above information, you might assume that there is no need to learn about coin grading. Nothing could be further from the truth. To be a successful collector, you should learn as much about the subject as possible.
The basic reason behind this logic is that no two coins are exactly alike- even coins of the same technical grade. This principle can be easily discerned by observing the results of any major rare coin auction. The same auction might offer three or four rare coins in the same grade, and they all bring different prices. This phenomenon has become even more prevalent in recent years as collectors battle for coins with great eye appeal. You owe it to yourself to understand why.
Nearly every successful collector I have worked with over the years has made an effort to learn something about coin grading. One of the benefits of working with a knowledgeable expert when building a collection is advice about coin grading. These individuals can explain the basics of grading they have learned from years of experience.
Buying The Best Coins You Can Afford vs. Buying The Best Coins For The Grade
As mentioned above, every coin is different. Some coins of the same grade can have vastly different toning and luster. The strike can also vary considerably among coins that have been certified similarly. Rare coin grading is an art, with complexities that take time to master. However, the investment of your time and effort in this arena will pay dividends when it comes time to sell your collection.
We have all heard the saying, “buy the best you can afford .”This sage advice works with nearly all fields of collectibles. The advice also means you should “buy the best coin for the grade” as well. Understanding the subtle differences between coins graded the same will help you more fully appreciate the hobby and the series you have chosen to collect. Even coins graded by the services as MS70 (perfect) can overtime develop spots or imperfections.
How To Learn About Coin Grading
Learning to grade rare coins is not something you can do overnight. You will need these skills, however, to understand rare coin values. When making a purchase decision, grading skills will help you assess whether a coin being offered is a good value. Sometimes the coin being offered at a bargain price might not be worth purchasing if the coin has negative eye appeal or just makes the grade. On the contrary, anyone who understands coin grading can better decide if a coin with great eye appeal is worth paying a huge premium.
One of the best ways to begin to learn about coin grading is through the above-mentioned American Numismatic Association (ANA). The ANA exited the coin grading business in the 1990’s, but has continued to be the leader in teaching collectors and even dealers about the subject. Each year the ANA hosts two weeks of numismatic education in Colorado Springs, Colorado. The events are called ANA Summer Seminar, and the classes for coin grading are among the most popular. They offer three levels of classes- Beginner, Intermediate and Advanced. For the past several years I have taught the Advanced class to a mixture of collectors and dealers who want to improve their skills.
The ANA also offers a shorter version of the beginner classes at many major coin shows around the country each year. Not everyone can devote a week to traveling to Colorado to learn about the subject. The easiest way to access the ANA classes about coin grading is to check out their online eLearning opportunities at money.org. There are several great offerings, one of which is a webinar I presented recently on “The Importance of Eye-Appeal.”
Best Ways To Start Learning About Coin Grading
When asked about how to start learning about coin grading, my advice is to concentrate on one series at a time. I have often stated that if you can learn to grade Morgan Silver dollars, you can apply this knowledge to any other series. Whether you are buying circulated coins or mint state coins, understanding the subtleties of each grade is important. A worn Morgan Silver Dollar in Very Fine condition can be attractive or unattractive, and it’s your challenge to understand the difference. The same applies to high-grade examples.
There are numerous books on the subject of coin grading, with the most basic information found in the Guide Book of United States Coins (Redbook) by R.S. Yeoman, Whitman Publishing. Other books include the ANA Grading Standards for United States Coins, by Ken Bressett, Whitman Publishing. PCGS (pcgs.com) and NGC (ngccoins.com) both have great information about coin grading on their websites and have published books on the subject. The PCGS photo guide for grading is particularly useful.
Learning From Expert Coin Collectors and Dealers Will Help You Make The Best Decisions
Finally, as I have stated many times about rare coins, your best source of numismatic education is from someone with years of experience. They can teach you things they have learned the hard way over many years. This expert may be a dealer in the series you collect or even a fellow collector. Use their insight to begin your understanding of the “art of coin grading.”
Even though most rare coins you encounter have been graded by PCGS or NGC, an understanding of the basics of coin grading will help you make the best decisions when building your collection. When it comes time to sell your coins, the effort you invested in learning about the subject will pay handsome dividends.
Third-party (PCGS and NGC) grading has revolutionized the hobby, but the stated grade on the holder only tells part of the story. Do yourself a favor and dig a little deeper- you will be glad you did.
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