When investing money, most people don't know the first thing about the different types of Mutual Funds, T-Bills, Series EE or HH Bonds, Municipals, etc.  They depend upon others that have become the experts to invest their money for them.  They ultimately look at return on investment as their measuring tool as to how they are doing.

Investing in coins is no different.  Most people could not tell you the difference between an AU58 or MS63 coin or an MS65 or MS67 graded coin.  They depend upon other experts to help them in this process.  Since coin grading is still an art based on the ability and experience of the grader to subjectively impart a grade, it becomes very important to know that the grading company that you choose has the reputation to deliver consistent grades that are respected by the buying community.  Just as some Mutual Funds are much better than others at choosing the right companies to invest in, so are are grading companies at delivering the promised grade and more importantly, the trust of the buying community.

When the rare coin market was limited to a small number of numismatists trading with each other, three broad definitions were enough to determine grade: "Good" was a circulated coin with most of the detail intact; "Fine" was a circulated coin with clear detail and some luster on its surface; and "Uncirculated" was a coin which had never been in general circulation and therefore, retained its Mint State condition.  Additionally, in the early 1970's, the American Numismatic Association board of governors recognized that something significant needed to be done about all of the counterfeit and altered coins that were plaguing the coin community.

As the coin market grew, collectors realized that some "fine" coins were better than others.  Even some uncirculated coins rose above the rest in detail, luster and general appearance.  Soon terms such as "very fine" and "extra fine" began to emerge as collectors sought to further define the condition of their coins....and increase their value to other collectors.  In 1948, Dr. William Sheldon, a renowned numismatist, developed the Sheldon Scale, assigning grades from "one" through "70" to coins on the theory that a "70" would be worth seventy times as much as a "one".  Although coin collectors agreed on the scale, they could not agree on the standard.  Thus, assigning the Sheldon Scale grades to any given coin is still a matter of subjective opinion.

Coin buyers became aware that one of the fundamental factors in determining rare coin values is the physical condition, or grade, of the coin.  Buyers determined that a coin graded Mint State 65 (MS65), for example, may have a market value many times greater than the same coin graded a Mint State 64 (MS64), although the difference between a MS64 and MS65 is virtually undetectable to the untrained eye.  Thus, a coin sold by one dealer as an MS64 may be sold by another dealer as an MS65.  In some cases a coin buyer could be victimized by product misrepresentations.  As a result, buyers could be caught in the middle as to which grade was the correct grade and was the buyer paying too much for a coin.  Thus, the third party grading services were born.

The first grading service to enter the market was American Numismatic Association Certification Service or ANACS.  ANACS was created by the American Numismatic Association (ANA) with a mission to identify counterfeit or altered coins.  ANACS certified its first coin on June 15, 1972.  Although started in 1972, ANACS did not begin encapsulating their graded coins in plastic holders until 1989.  The first grading service to encapsulate their graded coin in plastic holders to protect the state of the coin was Professional Coin Grading Services or PCGS.  PCGS started this process in February, 1986.  Not long thereafter, Numismatic Guaranty Corporation (NGC) started in 1987. 

It has been my experience that the top three companies you can count on are these three mentioned above.  All three of these companies have significant history, experience, expertise, and protocols that provide a high degree of buyer confidence that the grade of the coin you see in their holder is the grade it should have.

But what about return on your investment or "value of the coin" as based on the trust given by buyers to the grading company as determined by the delivered sell price.  If we look at the sell prices of the same coin given the same grade by the three different companies, it becomes very apparent that the coin buying community places different value or trust on the three different companies.  It has been my experience that PCGS outperforms NGC which outperforms ANACS when compared to "hammer price" or price paid for the same coin of the same grade.  Consistently, PCGS stands out on top with the highest values obtained for coins as compared to the other two.  NGC rates a near second with ANACS a distant third.  Any other grading companies are far back in the pack when it comes to delivering value of a coin sold.

Regardless of whether or not there is truly any technical differences in grading by the three companies, perception in the public eye states that there are significant differences.  Thus, a coin buyer wanting to purchase coins for an investment must always consider the "public perception" as this is what drives value.  Just as in any Publicly Held Company on one of the stock exchanges, perception of the company is what drives the stock price and if the perception is that the value of the company will go higher, more people will want to purchase that stock and drive the stock price higher.  Comparatively, if the trust and perception of a company's grading performance is high, more people will want to purchase coins graded by that firm causing the market to place a premium on coins graded by that particular company.  Obviously, at this point in time, PCGS and NGC has favor in the coin investor's eyes and commands a significant premium over the other grading companies.  And as an investor, I would want to place my money on the grading company that will obtain the greatest return for me in the long term. 

I hope this has helped and Happy Collecting !!