There are two types of coins to consider when buying coinage for investment purposes. Bullion coins are minted by national governments, usually in gold. Examples include the American Gold Eagle, the South African Krugerrand and the Australian Nugget [source: Financial Web]. These coins are not collectible, because they don't derive their value from their scarcity. They can be bought and sold through reputable gold dealers for a price relatively close to the commodity price of gold. (The price of a coin will be marked up when you buy it, and marked down when you sell it since gold dealers need to make profits on their transactions [source: Picerno].) In late 2010 and early 2011, high performance in the per-ounce price of gold made bullion a reasonably safe investment.
The second type of coins used for investments are collectible or numismatic coins. These coins are valued, not for their weight in precious metals, but because of their scarcity. Popular collectible coins include Morgan dollars, Walking Liberty half dollars and certain Buffalo Nickels. Many factors influence how valuable a particular coin might be, including condition, which mint mark it carries and the year of issue. Mint condition coins are always more valuable than coins that are heavily worn [source: Coin World]. Certain years of coins had fewer mintings, making them more rare and valuable [source: Coin World]. For example, some 1918/7-D Buffalo Nickels could be worth as much as $285,000 because the coins were printed with overdates when then 1917 die was impressed with a 1918 hub [source: PCGS].
In the coin market, the rarest coins tend to provide huge returns (upwards of 100 percent of their value in a year), while more marginally rare coins provide only modest returns (sometimes as low as 0 percent in a given year) [source: Knaus]. With any investment coins, find a dealer with a good reputation and inspect the coins carefully before making a purchase, as there are always forgeries circulating.