(MONEY Magazine) – ''It's the greatest investment in the world . . . There's not much supply out there and demand is sky-high . . . Don't miss the huge price run-ups . . . Some of our clients doubled their money last year . . . $10,000 invested in 1970 is worth $2 million today . . . 1,000% appreciation in five years . . . We hear $500 million to $1 billion is coming into the market . . . It's set to rise to heights never before imagined . . . Wall Street is buying in . . . The Japanese are just waiting . . . With savings accounts and CDs, you're up the creek if there's a depression. You're gonna wind up in the soup lines. Coins very rarely dip in price. And it's only temporary . . . The chance of a lifetime . . .''

Talk about exciting times. If the fall of Communism, the reunification of Germany, the imminent decline of apartheid in South Africa and the junk bond Walpurgisnacht aren't enough, try the brave new world of rare coins. The italicized fusillade above represents just some of the hysteria-inducing remarks of coin dealer Michael PapaGiorgio on his paid-for hour every Saturday on WOR-AM in New York City. He, in turn, is just one of the dealers, telemarketers and stock brokers who are mounting what may be the biggest promotional blitz ever seen for investing in coins. Many individuals recently soured on stocks and bonds are attracted to the turned-up flame of rare coins. Are those glittering profits authentic? Is rare-coin investing as low risk as some of its boosters are claiming? Or is coinmania merely destined to become the tulipmania of the 1990s? For the answers, you need a short course in the byzantine world of rare coins. Let's start with the news. Coins are going big time. Wall Street has indeed entered the market, heretofore a cozy backwater of collectors and a smaller contingent of investors -- plus the predictable array of crooks and shady dealers. The dawn of the new age came last April, when Kidder Peabody launched a $42 million private limited partnership in U.S. rare coins (minimum investment: $50,000). This move galvanized the rare-coin market. Dealers raced to buy investment- grade merchandise on margin in the belief that Kidder had started a Wall Street stampede. Result: a wild run-up in prices that spiked and then crashed $ in July when dealers, disappointed by Wall Street's silence on the subject, dumped inventory. Some coins fell as much as 40% over the summer. All last fall and early winter, however, one name was on the lips of dealers: Merrill Lynch. The biggest brokerage house, the rumors went, was preparing a major move into coins. PapaGiorgio, who is president of First International Rarities Exchange, a Chicago coin dealership, told his WOR listeners repeatedly that Merrill Lynch might be entering the market through the purchase of as much as $200 million of rare coins. Finally, in February, the brokerage filed a public limited partnership prospectus with the Securities and Exchange Commission to sell $50 million to $75 million worth of coins to small investors. Each limited partner will have to put up a minimum of $5,000. (Merrill Lynch mounted two smaller partnerships in ancient coins in 1986 and 1988. Now closed to new investors, they produced 22.5% and 18.6% in coin appreciation and trading profits last year.) Wall Street's new passion for coins is just the cue some dealers have needed to try to stimulate demand. Although prices have not regained last summer's high, dealers insist that coins have entered a golden age of price increases. Exclaims a promotional flier for Fred Sweeney Rare Coins Inc., a Shawnee Mission, Kans. dealer: ''Tens of thousands of individual investors will come pouring into the market, trying to ride the coattails of the big money . . . Expect a price explosion of unheard proportions.'' Notes John Albanese, president of Numismatic Guaranty Corp. of America, a leading independent coin- grading service: ''Telemarketers have been making cold calls, telling people that if they don't get in right away, they'll miss the boat.''

The latest news from Wall Street is not exactly designed to contradict that statement: Hugh Sconyers, manager of Kidder's private partnership -- up 20% in value for its first 10 months -- says the partnership will more than triple its stake in coins to $142 million, perhaps this year. Sconyers says he wants to purchase major private coin collections for the partnership. Wall Street's sudden interest in coins is not hard to explain, given customer disenchantment with mainstream investments. ''Stockbrokers want new alternative investments they can sell to clients,'' says Keith Zaner, trends editor of Coin World, a leading collector and investor weekly. Coins, which once might have seemed an eccentric choice, have been taking on investment legitimacy by looking more and more like stocks and bonds. This so-called securitization began in 1986 with the introduction of a consistent coin- grading system. Until the mid-'80s, buyers were at the mercy of one of the market's most sinister traditions: dealers graded their own merchandise and routinely inflated values. Even honest dealers disagreed about how to grade a given coin. ''It was total anarchy,'' recalls Joseph O'Connor, a dealer in Oak Forest, Ill. There are now many grading services, but only three enjoy wide investor confidence: the Numismatic Guaranty Corp. of America (NGC), the Professional Coin Grading Service (PCGS) and the American Numismatic Association Certification Service (ANACS). The services assign a grade to a coin submitted to them by dealers for a fee of about $26. The coin, along with a label stating its grade, is encased in a tamper-resistant plastic holder. Today more than 2.5 million individual coins have been ''slabbed''; of these maybe only 10%, or 250,000, have strong investment potential. Prices of these coins range from around $250 to $250,000, with some going for upwards of $1 million. The uncirculated, and rarest, coins are graded MS60 (MS stands for mint state) to a perfect MS70. Proof coins, struck by the U.S. mint for collectors but never meant for circulation, are graded PR60 to PR70. Coins that have been circulated -- and show dents, scratches and rubbing marks -- are assigned one of 19 grades, from 1 (for poor) to 58 (for ''about uncirculated''). Unless a coin is so rare that it exists only in poorer condition, MS65 -- free of any blemish detectable by the untrained eye -- is usually the minimum grade for investment. Independent grading has enabled investors to buy and sell coins sight unseen. And this in turn has allowed the investor to shop for price: if a buyer doesn't like what one dealer is charging for a specific coin with a specific grade from one of the three main services, he can call around until he finds an identical coin at a better price. Grading has trimmed dealer markups, but they still range widely -- from 8% to a stiff 30%. It would take three years to overcome that 30% hit on a coin that appreciated 10% a year, not counting storage costs. Another move to make coins trade more like conventional securities: the introduction four years ago of an electronic market called the American Numismatic Exchange. It offers an alternative to the cumbersome buying and selling mediums of auctions, coin shows and telephone trading. This computer network allows 175 coin dealers to bid on PCGS- and NGC-certified coins. It also lets investors buy and sell more quickly and at less volatile prices. Says John Schneider, president of the exchange: ''Our network is patterned on the over-the-counter market and the New York Stock Exchange. Our goal is to have certified coins trade just like major financial products. Then numismatic expertise on the part of the investor will become less and less important.'' While the moves toward securitization have helped investors, coins are not stocks, and the market in them is nothing like the stock market. Coins are limited-edition art objects, so valuation of any issue is inherently subjective. ''Coins are collectibles,'' says Tom Kurtz of Numismatic Management, a coin company in Iselin, N.J. ''They have only one fundamental, supply and demand, while stocks go up and down on such basics as earnings outlook and new products.'' And demand is sometimes hard to gauge -- there may not be a bid on a coin every day -- particularly when the market is being primed so vigorously. What's more, trading remains completely unregulated by any major government agency. And coins are not a liquid asset, no matter what some dealers may tell you. While industry improvements have made it possible to sell some coins in a single day, an investor might wait weeks and, in some cases, months for the right price for a very rare and valuable coin. Bottom line: coins are not the sure bet that their shrillest boosters claim. Meanwhile, the belief that coins are security-like investments is creating a dangerous situation. Madeline I. Noveck, a financial planner in New York City and an expert on antiquities, warns: ''Wall Street is popularizing coins as an investment, and that is drawing into the market many people who perhaps shouldn't be there, especially those with no coin knowledge.'' Why would any small investor want to put even a toe into such a murky market? To make money, of course. As the chart on page 157 shows, coins of high quality and reasonable rarity have done splendidly over the past five years.* Before you buy, be sure to follow these guidelines: -- Learn about rare coins. Go to coin shows (listed in Coin World), talk to dealers and collectors and read every book and journal you can get your hands on before buying a single coin. The successful investor needs knowledge to identify and follow the 200 to 400 kinds of U.S. coins that have genuine investment potential. For example, all of the Saint-Gaudens MS65 $20 gold pieces -- minted between 1907 and 1933 and bearing a relief designed by the famous sculptor Augustus Saint-Gaudens -- are collectible, but the investor needs to know which years may be undervalued and therefore worth owning. Similarly, only some of the heavily hyped silver dollars designed by George Morgan are investment quality. Those of lower grades and from years when millions were minted will be shunned by the knowledgeable buyer. Source books include the annual Coin World Guide to U.S. Coins, Prices & Value Trends (Amos Press, $4.95); A Guide Book of United States Coins (Western Publishing, $7.95), known as the ''red book''; and the Investor's Guide to Coin Trading by Scott A. Travers (John Wiley & Sons, $24.95). The American Numismatic Association and the Federal Trade Commission have jointly issued an excellent free guide, Consumer Alert: Investing in Rare Coins (ANA, 818 N. Cascade Ave., Colorado Springs, Colo. 80903). -- Find a reputable, experienced dealer. Best bet: someone in business in the same area for at least 10 years who is a member of the Professional Numismatists Guild (P.O. Box 430, Van Nuys, Calif. 91408) or the Industry Council for Tangible Assets (25 E St. N.W., Washington, D.C. 20001). These groups have established stringent guidelines for ethical conduct and can give names of dealers. Ask for references from clients and from a bank. -- Do your own price homework. Deciding what you are willing to pay requires knowledge of the price history of a coin. ''Look for undervalued material -- what's selling well below market highs -- especially in a rising market,'' says Tom Kurtz. You can find wholesale prices in one of these publications: The Certified Coin Dealer Newsletter (weekly; P.O. Box 11099, Torrance, Calif. 90510; one year, $99), Coin World (weekly; P.O. Box 150, Sidney, Ohio, 45365; one year, $26) and Numismatic News (weekly; 700 E. State St., Iola, Wis. 54990; one year, $24.95). Always bear in mind the need to factor in your dealer's markup, which can sometimes change an undervalued coin into a pricey one. -- Avoid the esoteric. U.S. government mintages are the only reasonable coin investments for the beginner because they enjoy the broadest collector and investor market. Paper currency, foreign and ancient coins, and issues by such short-lived governments as the Confederate States do not have enough buyers ^ and sellers to support an active market. -- Store safely. Do not leave your coins with the dealer or even at home. You'll have to add rent -- $25 a year -- for a safe-deposit box to your coin costs, but it's worth it to avoid theft of one-of-a-kind coins. And how about those partnerships? While the Merrill Lynch deals are accessibly priced, professionally managed and diversified, you pay for all that with 15% sales fees and annual management fees, as well as markups. And at $50,000 apiece, the Kidder partnership is aimed at a fairly exalted market. Besides, coin partnerships are like gold stocks: you might feel more secure having the genuine article than a piece of paper -- especially when the real stuff is beautiful to boot.

FOOTNOTE: *Our portfolio, compiled by Joseph O'Connor: 1942 Mercury 10 cents, PR65, up 10% over the past five years; 1930 Standing Liberty 25 cents, MS65, up 89%; 1878 CC Morgan $1, MS65, up 339%; 1922 Grant 50 cents, MS65, up 332%; 1936 Rhode Island 50 cents, MS65, up 162%.

BOX: STARTER COINS MONEY asked the three dealers below to recommend affordable coin portfolios for a beginning investor. The coins were selected for their strong demand and prospects for appreciation. All are currently trading below their recent market highs. The code that follows the name of each coin indicates the grade. Issues from different mints make up the sets. Prices do not include dealer markups -- which can add 8% to 30% overall.

Joseph O'Connor, O'Connor & Co., Oak Forest, Ill.

1907 Indian 1 cents, PR65RB $405 1927 Buffalo 5 cents, MS65 176 1935D Mercury 10 cents, MS65FB 395 1938 Washington 25 cents, PR65 265 1934 Boone Bicentennial 50 cents, MS65 425 1935 Walking Liberty 50 cents, MS65 360 1883O Morgan $1, MS65PL 800 1947 Booker T. Washington set, MS65 588 1952 Washington-Carver set, MS65 955 TOTAL $4,369

Gerald Bauman, MTB Banking Corp., New York, N.Y.

1913 Buffalo 5 cents, MS65 $200 1910 Barber 50 cents, PR63 1,100 1936S Oregon Trail 50 cents, MS65 800 1937 Roanoke Island 50 cents, MS65 700 1937 Texas Centennial set, MS65 1,200 TOTAL $4,000

Tom Kurtz, Numismatic Management Corp., Iselin, N.J.

1908 Liberty 5 cents, PR65 $1,250 1935 Boone Bicentennial 50 cents, MS65 465 1924 $20 Saint-Gaudens gold, MS65 2,800 TOTAL $4,515

CHART: NOT AVAILABLE CREDIT: CHART BY BETTY DUKE CAPTION: HOW FINE COINS CAN SHINE Some rare coins have been giving investors a spiky but rewarding ride in the five years since independent grading brought a mea sure of credibility to pricing. The chart tracks a selected basket of five investment-quality coins that cost $2,820 in January 1985. This group, described on page 160, gained 24.9% annually, on average, and was valued at $8,560 at the end of 1989. The same amount of money invested in the Coin World Trends index of 1,325 high- grade (MS65) coins would have risen an average of 21.2% a year, to $7,381. If the original $2,800 were put into Stan dard & Poor's 500-stock index instead, it would have risen an average of 20.3% a year, to $7,112, with dividends reinvested.