Buying Coins to Build a Collection

April-2016: Its been a while since I wrote this, off late the buying and selling has moved to other online avenues like Facebook. It is slowly showing trend of moving towards watsapp. The risks are similar to other online avenues. However the advantage in social media is one can to an extent know the other person and a cheat can’t get far away. There would still be issues with items not getting delivered to exact quality etc. But quite a few of the activity from eBay has moved over to these new avenues.

This article discusses the various aspects of buying coins, be it for collection purposes or for investment. Coin collecting is a time intensive activity and with quite a bit of variations in prices, it’s more difficult than stock markets. I have tried to put out some care to exercise and share some personal experiences.


Avenues:
There are various avenues that are today available for collecting coins. However in spite of these avenues collecting is not simple. The problem gets more compounded as quite a few are interested in coins and the general availability is on decline and prices in the past few years have gone up. Added to the fact that mint is releasing tons of themes every year, it is becoming more and more difficult to keep pace with the number of coins being released.
The various avenues broadly classified are;

• Traditional way: Keep coins that come in circulation
• Buy from Dealers: Good way to build up the collection
• Visit RBI / Branches: Cheap way to build UNC Collection
• Buy on eBay
• Buy on other online classified like OLX, Quirk
• Proof Set / UNC Sets from Mint

Traditional Way:
This is the cheapest way to collect the coins and was the most popular way till mid 90’s. However these days the awareness is so high that one rarely finds the coins in circulation. The problem is more compounded for those who do not stay in major metros. They hardly get to see the coins. Another issue is that of the condition of the coin. It’s very difficult to collect a coin in Mint condition by such way.


Dealer:
This is another good source to buy coins from. However with tons of dealers it is not as simple as buying from anyone and everyone. There are tons of fly by night operators and only a handful of good dealers. The best way to identify good dealers is to go through a known person. Visit exhibition and study the market. Enquire prices with quite a few dealers. Begin by buying in small quantities of low value coins from multiple dealers. When I began this few years ago, most of the dealers gave a price on higher side. Once the started noticing me and identifying me, the prices started coming down, the quality started increasing, they also started giving tips as to what to buy and what would appreciate in value. Calling me in advance about new arrivals and offering a price lock on items that I would often pick-up months later. Extending credit facility, so many a times I would buy something that was reasonable and by the time I would pay 3-4 months later, the price of the item would already have gone up. There are various techniques that quite a few of my friends suggested to get good bargains, but I only realized later that whatever strategy you follow, the dealers are one step ahead of you.

One of the strategy suggested was, to enquire about few coins whose price you know, and that you really don’t want to buy, they would quote high, then select the set of coins that you want to buy, get the total price, then subtract the initial coins you wanted to buy from the total. Trust me it doesn’t work.

Another thing I tried was to give them a list of coins I wanted to buy and ask for quote. The quote I would get was a mix of very high price (3 times the normal value one would get) for few coins, right price for most of the coins, and very low price (than market) for few coins. Great now I would then select the low quote coins and right priced coins. At the time of delivery, they would get me only right priced coins and mention that low quote coins are out of stock and they will get them to me soon.

Buying in bulk definitely helps, but note that whenever you are buying packets of 100, they are almost always checked by dealers for any errors and are cleverly removed from the packets. So you don’t really get that advantage.


RBI:
Although RBI counters and some small branches give out coins, it’s difficult to get a specific type of coin. RBI has made it more and more stringent to try and curb the practice of selling commemoratives. Hence one can try this out a few times but it’s not always possible to get the coins from counters. If you are getting it from RBI you would need to state a business purpose as to why you need the coins and provide your identity which is tracked. So if same individual is being issued commemoratives, it gets tracked. SBI Branches is other option, more so in smaller cities, where such tracking is substantially less. However this works on relationship and one need to be a dealer to get into that, it’s not for a normal person.


eBay:
eBay provides a good platform with quite a few sellers. However it’s not much different from dealers. Plus there is a risk of the quality of coin as you don’t know for sure what would get delivered. Here again there are 2 modes that seller offers one is fixed price and other is via bidding.
Fixed Price:

So looks good, buy on fixed. The interface shows you the fixed price and the shipping price. There are quite a few catches;

• Terms and Conditions: Be careful to read all terms and conditions. Often there are sellers who mention shipping free in local area and paid for other area. There was one seller who charged me Rs 500 for a coin worth Rs 25. Of-course I did not buy and took a hit on my reputation as buyer. The other aspect is adding taxes and other charges that shows up only when you are about to make the payment, often you don’t see this. 
• Combined Items: Normally if you are new buyer, with a long buy list, one would buy more than one item from same seller. Few sellers actually give combined shipping discount. For example Rs 2 Coin was for Rs 20 plus Rs 25 shipping. Quantity available 20. I bought 10 thinking that I would be charged Rs 20*10 plus Rs 25. But I was actually charged Rs 20*10 plus Rs 25*10. If you buy more than one of same item, the shipping chares doesn’t change till you go for payment and often you would be surprised to see shipping charges multiplied by number of same items. The best way is after you have selected items, drop a note to seller to give you shipping discount.
• Quality of Coins: If you are a new user [your score give it away] the quality of coins is typically inferior to what’s promised.
• Misquoting / Misleading: Another technique is to misquote an item that closely resembles other rare item. For example if there is a listing of Rs 5 Tilak-JI coin which is rare and is quoted for Rs 2500, one would find another listing for a regular Rs Tilak at Rs 1000. This gives a feeling to a new user that it’s the same coin going cheap. Or a Rs 5 2007 Rare Cross coin (UNC) which is rare and goes for about Rs 800 -1000, one would have a listing for normal Rs 5 coin that has exactly same description used, i.e. Rs 5 2007 Rare Steel coin for Rs 200 (used) with only image of obverse. The catch being that this is a normal coin [wavy lines] that one would also get in general circulation. In essence there are tons of such techniques sellers would use to cheat on new buyers.
• Increase price every week: There are some sellers who list an item at High price. One may not buy it. Next week they would list the same item at an even higher price. Followed by again listing it at yet higher price the following month. For someone who’s is following the item, it might look that market price is increasing. In reality the seller has not even sold a single coin but is just resorting to influence novice buyers.
• Flood of Same item: One of my initial purchases was 2003, Rs 1 Maharana Pratap. I had not done proper research and purchased a pack of 100 coins for Rs 100. I realized later that Single Coin was available for Rs 25 and hence the pack should be for Rs 1000 to Rs 1500. My action resulted in this item getting listed by at least 4 sellers for prices from Rs 3000 to Rs 5000. The single coins that were being sold for Rs 25 all of a sudden were quoted for Rs 70 to Rs 100.

Fixed Price Vs Auction Bidding:


So one might then say buying in bidding would give me a good price. Although true there is some pit falls that one needs to watch out for.

• Cartel bidding: The sellers operate multiple ID and bid from other ID’s for certain items where they want to jack up the prices. A novice would often take this as indication of true price and bid and win at higher price. The best way to notice this is go to bid details and check the bidders. Be suspicious if a particular buyer is bidding only for one to 2 sellers and the percentage of his activity with the seller. Also watch out for new buyers [less than 30 days, less than score of 10] all of a sudden bidding a high amount. As the sellers know the activity is tracked, they often create a new buyer id and use it to bid.
• Not honouring winning bids: Of the 30 orders I placed, nearly 3 orders where mine was the winning bid was not shipped or the seller requested to cancel the transaction. The reason was very obvious; my winning bid was nearly half the market price for the item. There simply weren't enough buyers interest it that item. Apart from putting a negative feedback, you can’t do much.
• Shipping lower grade: On some of the bids that I won at slightly lower than market price, I was shipped a slightly lower grade coin.
• Quoting a low priced item for bidding: In this normal low value coins [Rs 10 – Rs 20] are put as bidding items with price of Rs 1 and shipping as Rs 50 or Rs 75. A novice would tend to believe that this must be expensive and hence the item is going via bidding way. So even if you get the coin for Rs 1, you have paid a shipping of Rs 50 or Rs 75 essentially paying much more.
• Buyers Bias: Typically when one is bidding, one gets blinded by incremental price one has to pay to get the item. For example if an item is priced at Rs 300, I may feel it’s expensive. However it it’s via bidding, I would put a bid of Rs 200 and feel good. After few days if I get out bid, and the price becomes Rs 225, I would be more comfortable bidding Rs 250 as the physiology is if I can pay Rs 200, paying just Rs 50 more is OK. And couple of days later repeat this, so now I am OK paying Rs 350. I have observed this behaviour with quite a few buyers on Ebay. The Rs 2 Louis Braille UNC Set was available at Fix price of Rs 245 from one good seller. However quite a few other sellers had put this as bid starting from Rs 1. The item routinely was bought for amounts varying from Rs 250 to Rs 325.
• Buyers power: In the bidding there are times when one of buyer is a highly payer [can afford any price]. So essentially if he sets to buy something, he just wants it, price is not an issue. It’s best to realize this situation and refrain from bidding in such scenario. I have seen a particular proof set go for as high as Rs 20 K and the same item a few days later went for Rs 12 K.
• Wait and Watch: So one might then say, don’t bid for first time, watch it and then buy it second time around. Nope doesn't always work. I have seen a particular item on which the first time winning bid was for Rs 1200, then went down to Rs 900 and then up again to Rs 1300 and I was lucky to get lowest at Rs 650 and then went at Rs 1700. All of this within a span of around 4 weeks and that to from the same seller. And this is not with just one item, I have noticed similar trend with other items as well where the variation is about 30 – 40%. The example I quote was the maximum deviation I have observed.
• Flood of Same Items by multiple sellers: If any-time you see all of sudden multiple seller list the same older item after some time then the price got is higher than what its worth for. For example the Rs 5 Tilak-JI coin was not on Ebay for nearly 6 months. One of the dealers listed this and it went for around Rs 3100 when the actual market price of the items at dealers was Rs 2200. All of a sudden I saw more than 10 listing of the same item in the 6 week interval.

Ebay resolution for disputes is good for some types of disputes and not so good for some.


Having said that, some of the things you need to do is;

• Research: Know your coins in full detail. This avoids pitfalls when items are misquoted.
• Know Rarity: Have a general sense of what coin is rare and what is routine.
• Know Prices: Prepare a spreadsheet to track prices of items of interest. Get quotes from normal dealers, watch for the item price on Ebay. If the price is fixed, it’s not always a good indication as at times the fixed price is quite high and not one buys.
• Identify good Sellers: By a combination of study who is quoting misleading title, who is quoting high shipping charges, who is not honoring bids by studying negative feedback comments.
• Be Nice to Sellers: Give a fair chance. There was a seller who shipped an item that got damaged in transit. I politely wrote and said that his past shipments were great, this one has issue and he promptly shipped new set along with return shipping charges without waiting for me to ship the damaged items.
• Observe Shipping package: One of the way to identify a good seller is the care with which he has packed and shipped your item. This indicates his knowledge about coins and what can damage and how things need to be done. This knowledge is by experience and not with fly by night operators. Invariably this has been a good indicator for me. Of-course this means one has to buy something from them initially.
• Reputation doesn't mean everything: I have observed and experienced certain high reputation sellers engaging in unfair practices, while on the other hand quite a few new sellers have been great. As they are new, they don’t know the market price to that extent, plus they want to earn reputation and hence would give great price and good service. Take calculated risk with new sellers. I have got some great deals with new sellers.

Common Issues at Ebay:
There are quite a few things that can go wrong, just watch out and know the risks;

• Seller not honouring Bids: Best is to let it go, get your refund. It better to have your money back, then to get a lousy item that is not worth what you paid for, you loose your money and not get the item in condition you want.
• Receiving empty packet: Although I have not experienced it myself, I have read quite a few comments about buyers getting empty packets. If you have a high cost item, buy insurance at additional cost or best buy from a seller in your city so that you can pick up the item.

This does not mean that buying on eBay is always bad. There are quite a few cases where I have got items at great price with excellent quality that I did not even get it at best dealers at exhibitions.

• Fakes: Quite a few listings are fakes. eBay does not do its bit to keep fake coins away. Quite a few collectors have time and again pointed out to eBay about this, but there are no concrete steps. So watch out.

Buy on other online classified like OLX, Quirk
There is too much noise on these places. The ads are placed by people who are ignorant about coins and read partial info as to how a particular coin went for Rs 1,00,000/- and feel that all the coins they have would go for such an amount. The price quoted or the description is often vague and in my opinion it is not even worth to pursue this option.


Proof Set / UNC Sets from Mint
An excellent way of building a collection of proof set and / or UNC Set is ordering directly from the mint. This would the cheapest way to get you the new sets that are released. The sets can be ordered directly on-line of by filling a form and mailing it along with a DD to the mint issuing the coin. It typically takes around 8-10 months for the coin to reach you. If you are not sure of your residential address this can be a deterrent, an alternative to this is there are some dealers who would buy it on your behalf and charge around Rs 300 to Rs 500 premium for this service. You have to pay the money upfront, and the set will be yours irrespective of it gaining value on release.

However for older sets, one still has to buy them from a Dealer or sites like Ebay / Auction Houses.