Tips for Investing in Rare United States Collectible Paper Money


The stock market has been up and down. Real Estate has seen better days, unless you bought a bargain property after the Great Recession of 2008. Gold and Silver are still worthwhile but somewhat risky. Is rare collectible paper money a good investment?

Yes, it is: if you buy the right paper money.

Investing in paper money might seem a bit odd to the uninitiated. Spending $5,000 on a collectible seems to fly in the face of “traditional” investing strategies: diversify your portfolio with real estate, stocks, bonds, mutual funds, cash, and precious metals. The idea of going to a high-end coin shop for the purposes of investing would strike most people as eccentric, perhaps wasteful.

In reality, investments in rare paper money do payoff given time. Quick flips aren’t usually possible unless there is an anomalous event  that suddenly makes your note much rarer, ie. a fire destroys the large collection of an individual with similar notes. Short of random acts of God, paper money gains value slowly, subject to market conditions.

Most collectors agree that you must be able to invest some amount of money for at least 5 years before you realize a profit. 5 years is a conservative time frame, and it’s better to play it safe than sorry. If you pick notes that gain value before the usual 5 year term expires, by all means sell and pocket the cash: you’re in the game to make money, not spend it frivolously. Of course, paper money investors tend to also be serious collectors who will occasionally buy notes at a high premium they personally enjoy, while other notes in their collection are purely investment vehicles.

Don’t scoff at nutty Uncle Bob’s numismatic reserves. 🙂 There’s a good chance his hoard has gained value over the years, making it a nice rainy day fund or heirloom for future generations.

Here are some important points to remember when investing in rare paper money:

  1. Only invest money that isn’t required for the immediate future. Know your finances before locking up a substantial amount of money in any sort of investment. Paper money isn’t a guaranteed winner. Have enough liquid cash in your bank account for emergencies, tax payments, and other unexpected expenses. Before plunking down $10,000 on a rare note, make sure that $10K isn’t needed elsewhere in your life. More importantly, if you have to sell the note early, be prepared to take a loss if the market isn’t favorable.
  2. Buy rarities that can be readily liquidated. This is where some knowledge of the hobby comes in handy. You need to invest in a note that is likely to gain value, but isn’t prohibitively expensive that it would be difficult to sell for a profit. Notes that hammer for $150,000 at auction might not be the best investment for you, even if you have the cash available to purchase such a note. Remember, you’re going to need to find a buyer for that note in a few years. If the note appreciates in value to $200,000 you can’t necessarily sell it on a moment’s notice and ride off into the sunset. More likely, you’ll have to plan out a consignment process, sell it independently to a dealer, or find another collector with enough money to purchase it outright. $200,000 is serious money for most people, even multi-millionaires. Believe it or not, there are some great notes for investment purposes valued just under $10,000 that are much easily moved compared to the ultimate trophy notes. Find a good buy that can be sold later without too much stress.
  3. Only buy a note in Uncirculated or better condition, except if the note is extremely rare in a lesser grade. When in doubt, buy notes graded by PMG or PCGS as Uncirculated or higher. If you can get your hands on a Gem Uncirculated note, even better: the probability that another note like yours in the same or better condition being discovered becomes less likely. Rarity and condition are the two driving factors in the valuation of collectible currency. If your note is at the top end of the population for its Friedberg number, it’s a much safer investment compared to a similar note with a mid-range grade. Try to buy a note that grades in the top 90%-95% percentile of all known examples. Even if other notes are discovered subsequent to your investment purchase, the worst that can happen is you break even or lose a slight amount of money. The only exception to this rule are note types that are extremely rare, in which case condition is less important. Think Interest Bearing Notes, High Denomination large size type notes, or National Gold Banknotes.
  4. Timing is everything: take your note to market when it’s in high demand and its value has appreciated. 1o years ago, holders of Apple stock were probably ho-hum about the outlook for their investment: Apple was regaining its footing but not quite the juggernaut it is today. It would be understandable if you sold Apple in 2003. If you were taking a long position, however, it definitely made sense to buy and hold. Today you would reap a large profit and only pay long term capital gains taxes. The market for Apple stock is strong and its value has soared. The same goes for paper money. Pick and choose when and where you sell your note. If the market is currently flooded with multiple 1928 $1,000 star notes for sale, chances are you won’t get as much money for your note compared to a year when 1928 $1,000 stars are rarely seen. Always review major auction catalogs, green sheet values, and the inventories of major dealers to assess whether or not you can ask for top dollar on your currency investment.
  5. Don’t forget that gains on paper money investments are subject to taxes. Yes, even collectibles are subject to taxes, particularly if you make money on them. If you’re a dealer and claim your inventory as part of your business, you will pay tax on your annual income, opposed to a collector who irregularly sells notes for investment income. In the latter case, you will have to submit note’s purchase price, date of purchase, sale date, and sale price to the IRS once it leaves your hands. So, if you think you’ve made 20% on your paper money investment, don’t forget to subtract tax payments from that profit margin. You might be better off sitting on the note a little longer until you can net the 20% after the government gets its share.

Good luck investing in collectible paper money. It’s not as crazy as it sounds, and people DO MAKE MONEY on their notes. Take your time and pick a note worthy of your investment dollars, and then take it to the bank in a few years for a nice profit!


4 thoughts on “Tips for Investing in Rare United States Collectible Paper Money”

  1. Just bought a 1896 $5 educational graded VF+ PMG 30 for $3895. In your opinion, is that a fair deal? Not looking to sell it. Will pass it down to my son.


  2. hello how are you i hate to break it to you but thats a bad price. I hope that it looks like there are no folds and looks like its a 40-45 They usually sell just over 3000 sense you do not know much always ask a professional before buying but only if there is no way they make money from there advise there are 2 kinds of people thieves and friends. Any way i have the most rarest collection of one of a kind notes that the world is going to be in shock when i go to sell.If you are going to buy more notes i am willing to give you free advise that you can easily buy on your own and know your doing the right thing.
    If you are going to by more call me i will tell you what to do. I can tell you how to buy at 25 % below the going rate. xxx-xxx-xxx Kenny Adamo.i dont look at emails just call.I am the kind of person that like to help people i will just tell you the secret way to buy them.

  3. Hi Kenneth,

    Very, very valuable advice – thanks!

    I’m very new to the paper money collecting (I’m pretty good at sports cards, though.) I understand that I should aim for PMG 65 or higher. The question is, how to know the rarity of the paper money? I mean, for example, the 1917 $1 legal tender note PMG 65 valued less than the $2 of the same year. Does that mean that the $2 is rarer than the $1, or it’s just market demand?

    One more thing: I plan to acquire a 1899 $1 Black Eagle silver certificate at $800. In your opinion, is it a good price/investment?

    Many thanks for your valuable tips and advice 🙂

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