While hoarding coins due to their value goes back to the beginning of coinage, coin collecting as pieces of art was a later development. Known as the "Hobby of Kings", modern coin collecting is generally believed to have begun in the fourteenth century with Petrarch. Notes of Roman emperors having coin collections are also known, but it remains somewhat unclear whether these coins were studied, considered curiosities or were merely hoarded.
Coin collectors often begin by saving coins they have received in circulation, but found interesting. These may be the remnants of change from an international trip, or an old coin found in circulation. Over time, if their interests increase, chance will not be sufficient to satisfy the demands for new specimens, and a potentially expensive hobby is born. Some become dedicated generalists, looking for a few examples of everything. If they have enough resources, this can result in an astounding collection, as that of King Farouk of Egypt, who collected everything (and not just coins either). Some are completists, wanting an example of everything within a certain set. For example, Louis Eliasberg was the only collector thus far to assemble a complete set of known coins of the United States.
At the very highest levels of coin collecting, it can become a highly competitive sport. Recently, this has exhibited itself in registry sets, where the most complete set of coins with the highest numerical grades assigned by grading services are published by the grading service. This can lead to astronomical prices as dedicated collectors strive for the very best examples of each date and mint mark combination.
Most collectors determine that they must focus their limited financial resources on a narrower interest. Some focus on coins of a certain nation or historic period, some collect coins from various nations, some settle on error coins or exonumia, such as currency, tokens or military challenge coins.
Every collector collects what interests them, and there are as many ways of collecting as there are collectors. However a few themes are common and are often combined to a goal for a collection.
Many collectors attempt to obtain an example from every country which has issued a coin. In contrast to those who collect coins from all countries, many collect coins from only one country, often their own.
A mint will often keep the design of a coin the same for several years, with the only difference from one year to the next being the date. An example of a coin type is the United States Lincoln cent (pictured). In a Type Set the collector typically does not care what the date or mint mark of a coin is as long as it represents the design of that type of coin.
Rather than collecting one example of a type, some collectors prefer to collect by year, and thus collect one lincoln cent for every year from 1909 to the present.
Many collectors consider that different mint marks give sufficient differentiation to justify separate representation in their collection. This increases the number of examples needed to complete a collection from one per year to several per year. Some mintmarks are more rare than others and harder to find. This is what makes collecting different mintmarks exciting for collectors.
As the mint issues many thousands or millions of any given coin, there are generally multiple sets of dies used. Occasionally these dies will be slightly different, generally in a very small detail, such as the number of rows of corn on the recent US Wisconsin state quarter. Varieties are more common on older coins, when the dies were hand carved.
The automation of coin manufacturing processes during the 19th century has decreased the number of error coins produced, and somewhat perversely, increased their collectability. Collectors of modern coins find errors desirable because modern processes make the likelihood of their production very limited. Examples of coin errors include doubled dies, repunched mint marks, overdates, double strikes, off metal coins, displaced or off center coins, clipped coins, and mules (different denominations on two sides of one coin).
Collectors with an interest in, for example, ships or dogs may collect only coins depicting the subject they are interested in.
For some, the composition of the coin itself is interesting, for example there are a number of collectors of only bimetallic coins.
Many collectors restrict themselves to coins issues after the 18th or 19th century, while others collect ancient and medieval coins. Coins of Roman, Byzantine, Greek, Indian, Celtic, Parthian, Merovingian, Ostrogothic and ancient Israelite origin are amongst the more popular ancient coins collected. Specialties tend to vary greatly, but one approaches include the collection of coins minted during a particular emperor's reign, or a representative coin from each emperor.
Coins are often a reflection of the events of the time in which they are produced, so coins issued during historically important periods are especially interesting to collectors.
While many of these themes appear simple at first glance, the more serious the collector becomes, more problems surface. Where someone collects coins from every country, eventually the issue of what is a country will arise, especially in areas beset by civil war. When a collectors aim is every year and mintmark of a particular type, then there will often be one coin which is significantly more rare and expensive than the others.
In coin collecting the condition of a coin is paramount to its value; a high-quality example is often worth many times as much as a poor example—although there are always exceptions to this general rule. Collectors have created systems to describe the overall condition of coins. One older system describes a coin as falling within a range from "poor" to "uncirculated". The newer Sheldon system, used primarily in the US, has been adopted by the American Numismatic Association. It uses a 1–70 numbering scale, where 70 represents a perfect specimen and 1 represents a coin barely identifiable as to its type.
Several coin grading services will grade and encapsulate coins in a labeled, air-tight plastic holder. This process is commonly known as "slabbing", and is most prevalent in the US market. Two highly respected grading services are the Numismatic Guaranty Corporation (NGC) and Professional Coin Grading Service (PCGS). However, professional grading services are the subject of controversy because grading is subjective—a coin may receive a different grade by a different service, or even upon resubmission to the same service. Due to potentially large differences in value over slight differences in a coin's condition, some commercial coin dealers will repeatedly resubmit a coin to a grading service in the hopes of a higher grade.
Buyers are encouraged to look into the quality and features of the various grading services before deciding to purchase a coin based solely on the grade given by a service. The grading services came into being (PCGS being first) in an effort to bring more safety to investors in rare coins. While they have reduced the number of counterfeits foisted upon unsuspecting investors, and have improved matters substantially, because of the differences in market grading (which determines the price) and technical grading, the goal of creating a sight-unseen market for coins remains somewhat elusive.
Damage of any sort, such as holes, edge dents, repairs, cleaning, re-engraving or gouges, can substantially reduce the value of a coin. Specimens are occasionally "whizzed"--cleaned or polished in an attempt to pass them off as being higher grades or as proof strikes. In general, the buyer is cautioned to be careful of any unknown seller's claims. Because of the substantially lower prices for cleaned or damaged coins, some specialize in their collection. There is a market for almost any rare or obsolete coin.
A common reason given for purchasing coins is as an investment. As with any investment, careful research is required. As discussed in the numismatics entry, prices cycle and can drop, particular for coins that are not in great long-term collector demand. Condition, surviving population and demand determine price. Surviving population can be initially estimated from mintage figures. Specialists learn the exceptions due to melting and other circumstances with experience and study. Age, as such, is not a relevant factor. Claims made by advertisers using popular media outlets should be treated with great skepticism.
In contrast to investments in the classical financial sense (such as stocks and bonds), a coin collection does not produce income until it is sold, and may even incur costs (storage costs etc) until then.
Many of the reasons given for, and factors influencing investing, in coins are similar to investing in stamps or gold.