Last week I said that my next update would be about plans and goals for 2010, but I’m going to forgo that. Instead, I want to talk about coin collecting. Of all the things that people amass (barf bags?), collecting coins may go back the farthest and be the most popular. It can also be financially beneficial.

I’m particularly interested in old U.S. coins that are comprised of 90% silver. When the mint stopped using silver in common coins (1964), coins that were made of silver began disappearing from circulation and selling for more than the face value. It didn’t make much sense to spend a silver dime as currency when the value of the metal content significantly exceeded the $.10 face value. Today, these dimes trade for more than 12x face value.

The fed can wreak havoc on the value of paper dollars and coins made of cheap metals, but not on the value of coins that trade based on their metal content. For this reason, and given the correlation between silver and gold, these little old boogers make a good hedge against the possibility of further dollar depreciation. It’s a good idea to keep a small portion of your money in precious metals, and silver coins are a good way to do so. It’s also a way to keep precious metals actually in your physical possession, rather than holding a note claiming ownership in gold or silver in some vault thousands of miles away.

The most cost-effective way to invest in silver this way is to buy coins that don’t command a premium over the actual metal content. For instance, pre-1965 Roosevelt dimes were minted by the hundreds of millions; they aren’t sold for over $1 apiece because of rarity, but because of the value of the silver. In addition to dimes, quarters and half-dollars from this time period are often referred to as “junk” silver and are often bought in large quantities, such as a $1,000 face value bag. These coins can also be found in smaller quantities, such as rolls of 50 silver dimes, that are suitable for any budget.

If you don’t mind paying a premium for rarity, age, and/or condition, then you have even more options for 90% silver investment. You could go with…

Mercury Dimes (1916-1946):

Peace Dollars (1921-28, ‘34-35):

Or Barber Half-Dollars (1892-1915):

…just to name a few.

You’ll have to be more careful here, since there’s more variables that go into what you’ll pay than its melt value.

With gold and silver still pretty expensive (bubble?), you want to avoid getting burned. With 90% coins, it’s easy as pie to start slowly and gradually add more as you go. I recommend checking out Coinflation, which uses updated metals prices to determine the melt value of many different U.S. coins. It definitely helps you determine what kind of deal you’re getting. For actually buying the coins, I’ve bought a few on Ebay and at a local coin shop. Prices seemed to be comparable between the two. No matter where you buy though, it definitely helps to be knowledgeable on what you happen to be purchasing.