How to Get an 83% Discount on a Rare Silver Coin

Van Simmons started collecting rare coins when he was 12 years old...

Back then, coin collecting was a tough business. You had to be an expert, or you'd get ripped off.

The old coin market was a bit like the diamond industry is today. To value a diamond, you have to be an expert with a magnifying glass. You have to know about flaws and colors and cuts and clarity. Then you have to know everything there is to know about history and prices. Only then do you have any idea what a stone is worth.

The rare-coin market used to be the same way. You needed a magnifying glass and 30 years experience to judge the value of a coin. Professionals had a large advantage over nonprofessionals. Mainstream investors stayed away from the rare-coin market. They thought the market was a fraud.

Then Van Simmons came along. In 1986, Van co-founded a business called PCGS or the Professional Coin Grading Service. This service revolutionized the coin industry. It made coin prices transparent.

Van hired rare-coin experts and asked them to grade billions of dollars worth of coins. After they had graded the coins, the experts sealed them in airtight plastic wallets. The plastic wallet acted like a guarantee of authenticity. Novice investors could trade coins with other novice investors without knowing anything about coin grading. PCGS became a very successful business... and today it's still the top grading service in the world. (As an aside, I hear PCGS has figured out a way to grade and label diamonds. Maybe we will be able to invest in diamonds soon too?)

Outside coins, Van also collects pocketknives, Winchester and Colt antique firearms, American Indian memorabilia, antique fly-fishing rods, marbles, classic surfboards, old skateboards, and much more. Van has a library in his house. He packs its shelves with price guides for collectible objects.

He's too humble to say it, but he's certainly one of the most important people in the collectibles business.

I called Van today and asked him for a coin recommendation. I told him I wanted something affordable. "That's easy," said Van. "Morgan Dollars are a great deal. I just bought some for my kids actually..."

The Morgan Dollar is a silver one-dollar coin. The U.S. minted Morgan Dollars between 1878 and 1904... and in 1921 for one year. The coin contains 0.77 ounces of silver.

In 2003, when silver was $4 an ounce, you could have bought a common-date Morgan dollar for $125 in mint condition (MS65).

Today, silver is around $18 an ounce, 350% higher, yet you can buy the same mint-condition Morgan Dollar for only $170. To give you an idea how much these coins could be worth in the future, in 1985, Van Simmons paid $1,000 for one of these. Now, you can buy at an 83% discount to that price.

Rare coins do not move in tandem with gold and silver prices. In the last bull market, the silver price peaked in 1980, but the Morgan Dollar didn't peak until 1985. I don't know when the next bull market in rare coins is going to start, but I'm sure it's going to take the price of the Morgan Dollar far above $1,000 when it comes.

Besides, if Van Simmons is buying them for his kids, then they're good enough for my portfolio...

Good investing,

Tom Dyson