Coins Shine as a Hobby But Not as an Investment

BACK around March of this year, coin dealer Michael O'Higgins of Silver Spring, Md., was selling selected new 1995 Lincoln-cent coins for $275 each. The unique coin, called a ''doubled die,'' was sought out by collectors because it contained an imperfection made during the production process by the US Mint. Today, the same coin ''retails for around $39 a coin,'' he says.

Now that is price volatility. It's a drop in value of almost 86 percent in less than one year. The reason for the downward spiral, Mr. O'Higgins says: One person, who had a very large cache of the '95 doubled-die issue, suddenly put them on the open market. The enlarged supply yanked the bottom out from retail prices.

The world of coins is full of such pitfalls. Yet, there also is opportunity for financial gain over time, says O'Higgins, of Gobrecht Numismatics in Silver Spring, Md. ''The 1995 Lincoln doubled-die [at $39] is now affordable for almost any collector,'' he says. A person who stores a high-grade coin of that issue away for the next decade or so should make money over time, he says.

A similar incident occurred back in 1955, he says. The 1955 Lincoln cent doubled-die coin, in super tip-top condition, is now worth around $15,000 to $20,000, he adds. A slightly less-attractive grade retails for around $3,000.

If you want to enter the world of coins, says Beth Deisher, editor of Coin World, a weekly trade paper published in Sidney, Ohio, you have to ''know what your objectives are.'' One objective, she says, should be to buy the best quality coins you can afford and think in terms of years, not weeks or months.

''Coins are not like stocks or bonds. Each coin is different. It takes a good amount of homework'' to know what the likelihood of price gain is going to be, Ms. Deisher contends. ''Coins can be a very volatile market.''

Just ask Wall Street investors, many of whom got burned in recent years. In the 1970s and early 1980s, scores of prominent investors began to acquire rare coins. Stocks and bonds then were being pummeled by high inflation. ''Intangibles,'' including coins, antiques, rare stamps, and fine paintings were sought out as financial hedges by the well-to-do. Auction prices of some items moved up into the hundreds-of-thousands of dollars - and then millions of dollars. Hobbyists were increasingly driven out of the market.

As inflation returned to more normal levels, speculators and investors moved back out, many of them losing large sums of money. Wall Street turned its back on coins. The New York investment house Solomon Brothers Inc. no longer bothers to publish a rare-coins/intangibles index, as it did for many years.

While few financial planners dispute the pleasure of coin collecting as a hobby, they also note that studies show stocks and bonds outperform most financial assets over time. (See chart.) Moreover, selling off a stock or bond is usually not too difficult. But selling off a coin can be a challenge. Rare coins must be appraised. Valuations can differ. Stocks or bonds, by contrast, have a price determined through daily market patterns and can be followed through newspaper listings.

Ironically, the departure of Wall Street investors from coins has been good news for hobbyists. The return of collectors has helped shore up prices of key or semi-key ''collector coins'' - coins that hobbyists must acquire to complete sets. Take the case of the 1909 ''VDB'' Lincoln cent minted in San Francisco. (VDB are initials of the man who designed the coin. They are on the 1909-S issue.) Collectors who wish to fill out their Lincoln sets have to pay more than $400 to buy a San Francisco VDB cent in ''fine'' condition. An ''extra-fine'' version can cost just under $500.

Overall, coin prices have stayed steady since about late 1993 and 1994, says Brian Abrams, manager of ''New World Rarities,'' a dealership in Bohemia, N.Y.

One factor favoring price appreciation of collectible coins is the return of the ''baby boom generation,'' Deisher says. Children who collect coins up to about age 10, and then drop away, tend to return in their mid-to-late 40s. Boomers are now doing that. More collectors, of course, help drive up coin prices, since so many ''key'' coins needed for sets are already scarce, she says.

Currently, there about 1 million to 2 million active collectors in the United States, says Stephen Bobbitt, a spokesman for the American Numismatic Association (ANA), a nonprofit educational group in Colorado Springs, Colo. But studies also show that millions more have some interest in coins, he says.

To buy quality coins, say experts, trade with well-known dealers. Coin clubs can refer a person to reputable companies. Expensive coins should have been first ''graded'' by either of the two main appraisal services, the Professional Coin Grading Service or the Numismatic Guaranty Corp. of America, Mr. Abrams says. These graded coins come in ''slabs'' that are transparent plastic covers.