Making money in collecting, trading, selling early U.S. coins

I have collected coins since I was a kid and am now middle-aged, and I have done this mainly as a hobby with an eye for attractive coins and a passion for history, and with a secondary thought only toward investment potential.  However, I can tell you that hands-down, over the past 5 years, my coin collection has provided more stable appreciation and better performance than many of the mutual funds in my company's 403b selection.  Had I been able to invest 5 or 10 % of my allocation in early U.S. coins instead of the various mutual funds, I think my retirement funds would have been better off today.   

What are the keys to making money in U.S. coins?  I'd like to summarize a few of these key concepts, and will comment more about this later.  My comments do not speak for or to the gold coin market, as I do not collect them and do not have expertise in them.  These are my opinions based on my own experience with early U.S., non-gold coins:

First, be relatively focused in your collecting.  When I was a kid I collected everything and anything, from any country.  This is just not feasible when it comes time to liquidate part or all of your collection for a profit.  Choose a niche that excites you - I have decided to collect primarily Capped Bust half dollars, mainly by year but to some extent by Red Book variety, and then to a lesser extent a few type coins such as large cents, a Draped Bust half dollar, and I hope to get a Flowing Hair half dollar.  All of my coins are pre-1840, but this is just a personal preference (but I can tell you there is good demand for early U.S. "Federal period" coinage).  Buy things that you like and find intriguing and eye-appealing.

Second, buy quality coins.  You get what you pay for, generally.  Of course my wallet doesn't alway permit the finest, but in the lower grades that I can afford, I try to look for coins that are as original looking as possible (i.e., not cleaned, polished, scratched or otherwise tampered with) with nice patina, good surfaces free of scratches and corrosion... as I mentioned in the last sentence of the preceding paragraph, buy coins you find eye-appealing.  I do have some coins that have been cleaned (hard to find Bust halves that have not been cleaned or dipped at some point in their lives), but I try to limit this to very special coins, rare coins, and to those that have only been cleaned lightly.   A lot, but not all, of the coins offered raw on E-bay are suboptimal and a lot of the sellers are not forthcoming about problems such as cleaning, pitting, scratches, graffiti, or even holes in the coins.   Avoid sellers or dealers who do cannot display a photo of a coin as good as or better than the ones I have posted here on my site (I am a very amateur photographer)... if they can't at least try to make an effort to clearly display their coin, then be wary.  If you are cautious and very selective, you do not necessarily have to limit yourself to PCGS or NGC-slabbed coins, which usually are quite a bit pricier due to the cost of the professional grading service.   

Third, keep in mind that recent issues and particularly modern (post-1982) commemoratives by the U.S. mint are made in mass quantities, with few exceptions.  I got lucky with my $39 purchase of a 1999-S silver U.S. State Quarter proof set of 5 quarters, which I was able to sell for about $360 a few years later.  It seems that their value peaked somewhere around $400 and now is at a much lower level.  That particular set was one of the few exceptions.   Much rarer and more desirable coins are available in the early U.S. coins series.   I've gotten lightly burned selling off many of the U.S. Mint  proof, mint, and modern commemoratives I collected as a kid... luckily I did not put too much money into any of them.  That being said, there's nothing wrong with getting kids started in collecting with the State Quarter program, which I am doing with my daughter.  Coins are a wonderful and educational hobby to teach about history, geography, culture, and numerous other topics.

Finally, have fun and don't worry too much about your budget.  There are plenty of series, even quite historical and "old" U.S. coins, in which really nice examples can be had for less than $10.  Same goes with foreign coins, ancient coins, etc.   Assembling a nice collection can be done at whatever pace you desire.

My 1794 S-71 large cent, contemporary with The Battle of Fallen Timbers (August 20, 1794)

1794 S-71 large cent obverse

1794 S-71 large cent reverse

Edge lettering on 1794 S-71 large cent

As a fairly low-budget early U.S. coin collector, my acquisition of a 1794 large cent was quite a thrill.  I opted for something that wasn't too beaten up or corroded, but yet I needed to find something that wouldn't break the bank and would fit my personal finances.  Since I grew up approximately 40 miles from the site of The Battle of Fallen Timbers (August 20, 1794), which is in the present-day city of Maumee, Ohio, getting a relatively affordable coin of this date had some real significance to me.  The really neat thing about these large cents is that they represent a true piece of history certainly handled by Revolutionary War veterans during their circulation; their incuse edge lettering stating "one hundred for a dollar"; their substantial diameter size, weight and heft; and the beauty of the design of Liberty on the obverse as well as the wreath on the reverse.  Once I figure out how to get photos up on this site, I will post photos of my large cent.   Mine cost me about $425 in trade value of other U.S. coins I had; no small purchase for my economics.  But lesser graded samples or samples with a few problems can be had for cheaper.  This is a S-71 variety, which is an R2 in terms of rarity, fairly common.  It has a few little problems including a little rim ding below the 4 and some pitting original to the planchet (common in copper from this era, some of which supposedly came from copper hoops around barrels of gunpowder or which sat in the soggy bottoms of ships), but has a really nice original color and patina and some interesting die clashing near the throat. 

The Battle of Fallen Timbers has been called the “last battle of the American Revolution” and one of the three most important battles in the development of the United States. The decisive victory by the Legion of the United States over a confederacy of Native American tribes opened the Northwest Territory, a huge region unceded by the native inhabitants, for westward expansion and led to the eventual establishment of 5 states and specifically Ohio’s statehood in 1803.   The summary below is pretty brief, but if you would like more details, the following links to other blogs cover The Battle of Fallen Timbers in more extensive detail:

http://franceshunter.wordpress.com/2009/10/21/the-battle-of-fallen-timbers-part-i/

http://burnpit.legion.org/2011/08/battle-fallen-timbers-american-army-defeats-indian-confederacy

"Charge of the Dragoons at Fallen Timbers" by R. T. Zogbaum, ca. 1895

The battle took place amid trees toppled by a tornado just north of the Maumee River in the present-day city of Maumee.  There is an eponymous "Fallen Timbers" shopping center directly across the street from the battle site; a nearby monument marks where earlier experts believed the battlefield to be until a relatively recent (1995) archaeological survey and work by Heidelberg University in Tiffin, Ohio proved them wrong and uncovered the site adjacent to the shopping center:  

http://touringohio.net/history/battle-of-fallen-timbers-monument.html

Battle of Fallen Timbers Monument Inscriptions: (Front)
The Greenville Treaty
To General Anthony Wayne who organized the “Legion of the United States” by order of President Washington and defeated Chief Little Turtle’s warriors here at Fallen Timbers August 20, 1794. This victory led to the Treaty of Greenville, August 3, 1795, which opened much of the present state of Ohio to white settlers.

(Right Side)
Indian Warfare
In memory of the white
settlers massacred 1783-1794 (Left Side)
Onward in peace
To the pioneers of Ohio
And the great northwest (Back)
The Battle of Fallen Timbers
To Chief Little Turtle and his brave Indian warriors 

The Legion of the United States was commanded by General “Mad” Anthony Wayne, a veteran of Valley Forge handpicked by President Washington to oversee the new nation’s first professional army. Wayne’s force, made up of 1,600 to 1,700 “regulars” and 1,500 members of the Kentucky Militia, was recruited and formed in Pittsburgh, underwent drill and combat training at Wayne's camp Legionville near present-day Baden, Pennsylvania (northeast of   Pittsburgh), then marched and quartered at Fort Washington in Cincinnati, then marched north from Cincinnati to build a series of forts between the Ohio and Maumee rivers. Among Wayne’s officers was 21-year-old General William Henry Harrison, who would win the Battle of Tippecanoe in Indiana in 1811, and ultimately become (very briefly) the ninth president of the United States.

Waiting for Wayne and his men were about 1,000 warriors representing the native confederacy and led by Miami war chief Little Turtle, an old nemesis of the United States. Other leaders of the confederacy included Shawnee Chief Blue Jacket and Delaware Chief Buckongahelas. One of the most famous leaders of the native resistance, Tecumseh, also took part in the battle.

Fewer than 100 men on each side died in the brief battle, but the Legion’s victory marked a major turning point in the battle for the western frontier. The victory led to the signing the Treaty Greenville on August 3rd, 1795. Without the treaty, portions of Ohio, Michigan, Indiana, Illinois and Wisconsin might have remained a buffer zone between Indian and settled territory, or even become part of British-controlled Canada.