If you become a numismatist (collector of coins, paper money, tokens and medals), you should decide if your primary focus is on collecting, investing, or a combination of the two. Collectibles are a much different kind of investment than stocks and bonds. Collectibles do not produce monetary interest or dividends; they have value only because of limited supply combined with demand from collectors who appreciate their historical, artistic or other merits. Numismatic items tend to gain in value when there is more money to be spent (either because of inflation or because of greater wealth) or when there is an increase in popularity, as we saw beginning in 1999 and 2000 with the 50 State Quarters and the Sacagawea dollar.

A very brief history of coin supply/demand trends in the United States:

1950's — Coin collecting increases in popularity during a period of post-war prosperity.

1960's — Coin collecting was very popular with well-attended coin club meetings across the U.S., but there was a fairly narrow focus on modern U.S. coins. Varieties such as the 1960 "small date" cent helped spark interest, as did the removal of silver from coins in 1965.

1970's — Collecting U.S. coins by design type becomes popular; prices increase due to inflation and the rising price of silver and gold (which became legal to own again in the form of gold bullion and bullion coins). Price of silver peaks at about $50/ounce in 1980 before falling rapidly.

1980's — Introduction of third-party graded coins encapsulated in plastic "slabs"; temporary speculative price increases for many high quality (but not necessarily rare) "slabbed" coins.

1990's — Numismatic investments perform much worse than the stock market; coin prices fairly flat (often well below 1980's peak values); coin collecting and other "old-time" hobbies suffer due to increasing demands for peoples' time.

Late 1990's — Resurgence of interest in coins due to new U.S. coin designs; prices on high-end material increase due to wealthy bidders (many of whom made their money in the stock market). Internet auctions pioneered by eBay® make it much easier to buy and sell collectibles, including numismatic items.

2000's — As this decade draws to an end, it's already being described by some as the "Decade from Hell," beginning with the "dot com" and stock market downturns and the attacks of September 11, 2001, and ending with the "Great Recession" triggered by the mortgage crisis. Nonetheless, collector interest remains high in many areas, and the prices of silver and gold bullion are also at or near record highs, at least measured in weakened U.S. dollars. The middle of the decade saw strong prices realized (including many new price records) at major numismatic auctions. The recession has "softened" the market somewhat, however the prices of high quality coins have not declined nearly as much as the stock market.

Certified or "slabbed" coins are now the norm rather than the exception for mid to high priced material, and certified paper money is also popular. Collectors compete to build "registry sets" with the major grading services, and most coins submitted for grading are now modern coins, in the hope of receiving the MS-70 ("Perfect") designation. Anyone buying or selling U.S. coins (and even some world coins and other items) should be familiar with coin certification and how it impacts the market.

2010 and Beyond — Predicting the future is always difficult, but it seems that numismatic collecting in various forms will be with us for a long time to come, even if the usage of currency in the forms of coins and paper money continues to decline. Demand trends will vary; it remains to be seen whether modern coins in very high grades (e.g., MS-70) will remain popular. Diversification by including classical coin designs and types, world coins, and perhaps other numismatic items such as tokens and medals, might seem advisable.

The best advice here for the average person is probably to enjoy collecting, treat it as a hobby, and spend only modest amounts of money. Coin investing has many risks (for example, coins are not a standard commodity and are subject to differences of opinion with regard to grade and value) and should be approached with great caution, and only when the investor possesses the necessary knowledge. You can gain a great deal of knowledge and fellowship by joining a coin club and becoming friends with experienced members who specialize in various aspects of numismatics! Although a great deal can be learned on the Internet and in books, there is still no substitute for personal interaction, especially if you want to maximize your enjoyment of the hobby!