What is the Difference Between a Coin’s Price and its Value?

Price and Value are Not the Same Thing

There is a big difference between the price of a coin, and the value of a coin. Although you often see these words used interchangeably, it is important that you understand the different concepts represented by each.

The “Price” of a Coin is How Much it Would Cost You to Buy it From a Dealer

This is pretty straightforward. The “price” of a coin is merely the amount that it would sell for on the open market, otherwise known as its “retail price.” Coin prices are set by many different factors, including the type and grade of the coin, its rarity and desirability, and to some extent its availability in the marketplace. The most frequently used price guide to U.S. coins is the Red Book.

The “Value” of a Coin is How Much You Can Sell it for Today

Here’s where it gets a little complicated.

When you want to establish what your coin collection is worth today if you wanted to sell it, you are establishing its value. The amount you can sell your coins for (its “value”) is considerably less than its “price” if you had to replace them. Dealers need to make a profit to stay in business, so when you go to sell your collection, you’re not going to get those nice, high Red Book prices. The Red Book prices are retail amounts.

Consider the Blue Book

There is another book, known as the Blue Book, (formally titled “Handbook of United States Coins”), which is the most widely used guide to wholesale coin values. These are the values a coin dealer will offer to pay you for your collection. They typically run about half of what the coins retail for. Coins which derive most of their value from bullion (such as common-date American Eagles and Double Eagles) will get you more (75% to 85% or so) because most of their value is based on the gold itself, rather than the rarity of the coin.

Appraising Your Collection for Insurance Purposes

The one time when it is correct to use the “Price” metric to determine what your collection is worth, is when you are establishing its value for insurance purposes. In this case, you want to insure the replacement cost of your coins. Since you’d have to pay the Red Book (retail) price to replace them, this is the metric you should use.

Always be Realistic About Prices and Values

There is nothing more satisfying to a collector than to pluck a coin worth $100 in the Red Book out a dealer’s $10 pick bin. And in this case, you’ve probably done very well, because it’s likely the dealer overlooked something here. But the more typical case is finding lots of $20 Red Book priced coins the $10 bin. This is because the dealer is probably overstocked in this material, and would be happy to get his cash back to make more marketable purchases. Be careful that you don’t get carried away thinking you’re getting bargains in cases like this, because the amount you can sell the coin for, its value to you, is about what you paid for it. In other words, don’t deceive yourself into thinking that the value of a given coin is equivalent to the price you paid for it.

Coin Collecting – A Rewarding Hobby

One remarkably rewarding hobby, in more ways than one, is coin collecting. Though it may not have the same visceral excitement as, say, hang gliding, it has a subdued joy that is more than worth the experience. The simple joys of finding a coin you’ve been looking for or discovering a mint-condition penny from forty years ago is a pleasure that is not to be missed. While this may be difficult for some to understand, coin collecting is a reward all its own and, for those who do it, there is nothing else like it.

To understand the pleasure of coin collecting is to understand the pleasure of discovery. You do not collect coins just to have metal lying around, you collect coins to find something new. This is because, with the number of coins minted around the world, there is always something new to discover. There are always more coins, more designs, more commemorative editions, and more periods in history to explore. Which means that completing a coin collection is impossible, because there are always more coins to collect.

However, it is not only the coins themselves that make coin collecting so enjoyable. There is also the fact that there is always something more to learn about coins and coin collecting. The joys of discovery are not only in the coin shops, they are also in the mind. With every article, book, or simple observation there is something new to learn, ponder, or finally decide. The exploration of topics and knowledge has its own rewards and coin collecting provides plenty of opportunity to do just that.

Of course, coin collecting has more tangible rewards as well. Coins do tend to increase as the years pass on, so there are monetary rewards in addition to the mental rewards. And there is a certain excitement in finding a unique coin that is worth a whole heck of a lot of money. And, when you do manage to do that, you not only get the satisfaction of discovering something unexpected, you can keep it for its investment potential over the long haul. After all, rare coins are not getting any more common, so they are only going to increase in value over time.

So, with all these exciting facets to a coin collection, how do you actually start with coin collecting? The best thing to do is to just start looking through the change you have on hand right now. After all, all the coins that are now being collected were once change in someone’s pocket. So start with the coins you already have, learn about them, and then move out from there. And, as you collect more coins and learn more about them, the continual process of discovery will be its own reason for continuing your explorations. Then, when you finally discover the joys of simply collecting coins for the sake of collecting coins, you will be able to assemble an impressive set of coins that will be an investment all its own. Which will make a lot more people happy about the fact that you enjoy coin collecting so much.