Like with any collectible, the value of a coin is a factor of rarity and condition. While rarity is fairly objective, condition is much more subjective. Individuals might rate a coin very differently based on a variety of issues, such as experience; magnifying equipment; and personal preference.
Initial efforts at grading were simple. Coins were assigned to three categories: good, fine and uncirculated. However, in the last century or so the need arose to impose a more precise and standardized system of grading. This resulted from a variety of trends, including the increasing interest in coin collecting as a financial investment, and the fact that coin collecting went from the “hobby of kings” (accessible only to the aristocracy) to the “king of hobbies” (embraced by all classes of people). As coin collecting boomed, consistent standards were essential to the credibility of this thriving pursuit.
Experts visually assess five key components when grading a coin: strike, surface preservation, luster, coloration, and eye appeal. They then assign a grade consisting of letters and numbers. The letters, from poor to excellent, can be translated as follows: Basal State (also Poor (PO)); Fair (Fr); About or Almost Good (AG); Good (G); Very Good (VG); Fine (F); Very Fine (VF); Extremely Fine (EF); Almost or About Uncirculated (AU); Uncirculated (Unc); Brilliant Uncirculated (BU). Numerical grades from 1 to 70 accompany the verbal grades, with numbers 60-70 reserved for uncirculated coins. Some grading companies also assign a plus sign (+) to indicate that a coin is in the top of its grade.
At a professional grading service, two or more graders will authenticate and grade a coin, then pass it along to another grader who assigns the final score based on his own assessment and the accompanying recommendations. Starting in 1986, graded coins have been “slabbed” — permanently sealed in a plastic case for protection against damage and tampering.
While grading coins does offer a very useful set of standards, there will always be variations when comparing identically graded coins side by side. In a given grade, one specimen may be at the top of its grade, while its neighbor may be at the bottom.
Ultimately, the old adage “buy the coin, not the plastic” holds true. When considering any coin, inspect it closely. If it lacks eye appeal to you, it may be difficult to sell. Conversely, if you find it appealing, it will probably be attractive to other collectors.