Graded vs. Raw Coins
At a Glance
A graded coin has been verified as genuine and has had its condition evaluated by a professional grader who has likely seen many thousands of coins in his or her career. Although you will pay more for graded coins than you would for raw coins, you can also be reasonably certain that your investment is safe.
For decades, coin “slabbing” has been a major source of profit for coin dealers and grading companies alike. In this process, a trusted company such as the Professional Coin Grading Service (PCGS) or the Numismatic Guaranty Corporation (NGC) verifies the authenticity of a coin, grades it on a 70-point scale and seals it in an airtight plastic holder. A raw coin has not gone through this process; it’s simply a coin.
In general, coin grading services are good for collectors. Slabbing a coin helps to preserve its current condition while making it easy to admire and show others. In addition, because the differences between coin grades at the top end of the “mint state” scale are so minute, it’s difficult for most collectors to grade their own coins accurately. Thus, when buying graded coins, it’s less likely that inexperienced coin collectors will be taken advantage of by unscrupulous sellers who overvalue their coins.
On the other hand, the difference in a coin’s value between two grades — MS-66 and MS-67, for example — can sometimes be astronomical. When buying graded coins, you can expect to pay the full book value for the grade displayed in the coin holder, even if the coin is a borderline example of that grade. Coin dealers also pass the grading fee of around $20 per coin to the customer. So, if you are looking to acquire coins in bulk, buying graded coins is a poor way of doing so. If you’re a new coin collector, we hope this comparison of graded vs. raw coins will help you get started.
Pictured at top: PCGS MS-70 Silver Eagle
Price of Graded vs. Raw Coins
As mentioned above, it is always more expensive to buy a graded coin than a raw coin if everything else is equal. However, when you choose to sell your collection, you will find graded coins much easier to sell. Buying graded coins virtually eliminates the chance of finding a “diamond in the rough” that has been undervalued by the seller, though. On the other hand, if you find a raw coin that might be worth more than the seller’s asking price, you have to ask yourself why the seller hasn’t sent the coin in for grading himself. The coin might have another problem — perhaps it has been cleaned. It could even be counterfeit. So, while graded coins are more expensive than raw coins to buy, they are also safer.
The risk factor when you buy graded coins is almost zero. The primary risks are counterfeit coin holders and over-grading. Although the major coin grading companies have all taken steps to prevent counterfeiting, some scam artists still attempt to make fake coin slabs. Every graded coin has a unique serial number, and coin slabs generally have anti-counterfeiting measures such as rainbow holograms. Before buying a graded coin, check the grading company’s website to see what their authentic coin slabs should look like and confirm that the serial number matches the coin and grade. In some cases, a serial number search may yield a photograph of the actual coin.
If you buy raw coins, the risks are greater — especially if you aren’t familiar with the seller. The safest source from which to buy raw coins is a local dealer with many years of experience. These dealers depend on the trust of their local customer base and won’t do anything to break that trust. An online-only seller, on the other hand, may have no physical storefront for you to visit. A scam coin company may victimize as many online customers as possible before changing its name and beginning the process again. When buying raw coins, remember that there is no substitute for examining a coin in person. If you can’t do that, make sure the dealer is trustworthy.
As mentioned above, the fact that a coin is graded can have a tremendous effect on its value. For example, consider the 1879-O Morgan Dollar — a fairly common date. At the time of writing, an average circulated version of this dollar is worth about $30 — average for a common Morgan Dollar. If it has received a basic “uncirculated” grade of MS-60, it’s worth about $75. If it is graded MS-65 — an especially good example of an uncirculated coin — it’s worth about $4,000. The highest grade ever assigned to an 1879-O Morgan Dollar by PCGS is MS-66, and they have only assigned the grade to 14 coins. In 2011, one of these coins sold at auction for $29,900. It is highly unlikely that a raw 1879-O Morgan Dollar could ever be sold at such a high price, regardless of its condition — there are too many factors to consider when grading a coin, and most collectors are ill-equipped to assign grades accurately.
Buy the Coin, Not the Holder
The three most popular coin grading services are PCGS, NGC and ANACS. However, there is nothing preventing new coin grading companies from being founded. Some of these new grading companies may be perfectly honest. However, there have also been reports of eBay sellers creating their own “grading companies” simply so they could sell their own grossly over-graded coins at inflated premiums. Some of these companies have even been accused of fraudulent behavior such as modifying the dates and mint marks on coins, or sawing two imperfect coins in half and bonding them together to create a single “perfect” coin. Unless a coin is fraudulently altered, it can be very difficult to stop these sellers from doing business as the coin dealers and “grading companies” may be set up as separate corporations with different owners. Thus, the “grading company” can stand by the claim that it does not sell the coins it grades.
In addition, some coin experts believe that the major grading services graded coins more strictly in the past than they do now. For example, a coin graded MS-68 today might have only received a grade of MS-66 during the 1980s. Some coin dealers have taken advantage of this trend by buying older graded coins and breaking the holders. They then send the coins to grading companies with the hope that they will receive higher grades and can then be resold at a profit.
For these and other reasons, it is vital to avoid being swayed by the holder when you buy a coin. It’s the coin you’re buying, not the holder. If something about a coin seems wrong, don’t buy it — regardless of the grade or price.