If you have a lot of storage space, your attic or garage may be stuffed with old furniture, books, and other items you've held onto for years. At first glance, it may look like just a pile of trash. But if you look around carefully, there could be some valuable collectibles lying around waiting to make some money.
Important points
- Collectibles range from dinosaur fossils to comic books, and each has unique factors that affect its value.
- The value of collectibles often depends on nostalgia and emotional appeal to the buyer, rather than just monetary value.
- The future value of a collection is determined by its rarity and how attractive it is to future collectors based on trends.
- Collectibles require proper maintenance and care to maintain their value, which usually comes at an additional cost.
- Keeping a keen eye on market trends and predicting future item popularity is essential to successful collection investing.
Collectibles are items that are worth much more than their original selling price and are considered alternative investments that don't fall into other categories such as stocks, bonds, cash, or real estate. Investing in this asset class is profitable and helps you maximize your returns. However, it helps to know some basics. This article looks at collectibles as an investment and helps you decide if this emotional market is a good place to park your money.
Everything old becomes new
A collectible is anything that can be sold for more than its original value. These are items that increase in value over time. Although rare, some mass-produced items can become collectible items. Think back to when Beanie Babies first hit the market. Another feature of collectibles, like rare photographs and many works of art, is that they are of interest to collectors. To get the most out of a collectible, owners need to make sure it is in great condition. Trading cards, stamps, and comic books are just some of the most well-known collectibles. Here are some concrete examples.
140 million years BC
A young Allosaurus dinosaur gets buried in the mud hidden under the undergrowth. Millions of years later, an amateur paleontologist pulled it out, or at least the remains of its head. Once on the market, a reconstructed Allosaurus skull can sell for thousands of dollars.
1908
Honus Wagner of the Pittsburgh Pirates hit his 10th home run, an incredible feat before the home run era of Babe Ruth, and finished the year with a batting average of .354, one of the best years of his career. . The following year, the American Tobacco Company commemorated Wagner with a trading card inside cigarette packages. Fewer than 60 people visited the store before the world learned that Mr. Honas was adamantly against smoking. In 2000, a Wagner tobacco trading card sold for $1.1 million on eBay.
1962
Stan Lee created a superhero who not only saves the world, but also worries about paying rent, a sick aunt, and passing the next test in school. In 2021, a near-mint condition copy of Spider-Man, who first appeared in comic books, sold for $3.6 million at Heritage Auctions. The comic book “Amazing Fantasy No. 15” was published in his 1962 year and sold for 12 cents.
What do these collectibles have in common?
So what do fossils, comics, and baseball cards have in common? Most people have no problem calling them collectibles. However, when talking about diamonds, gold, and other precious materials, people tend to call them investments. In theory, these materials, and even stocks, could be called collectibles. That's because their prices are based on what people are willing to pay for them, known as market value, rather than their intrinsic value. This is the calculated or perceived value of the item. Precious metals and stocks have intrinsic value.
For metals, this value is based on rarity. Whether you melt it, burn it, or bend it, the same atomic substance remains in the end. In the case of a stock, its value is created by the underlying brick-and-mortar company it represents, a company that generates profits commensurate with the price you pay for the stock.
What makes collectibles different is that even the slightest damage can wipe out all of their value. This is because the value of collectibles is based on nostalgia and other emotional factors, which can be volatile. Collectibles that are in good condition are valued more highly than those that are not. Therefore, a baseball card that is scratched or torn is worth much less than one in its original condition.
20 year itch
Nostalgia is thought to cycle in cycles of 20 years. This means that what is popular now will be a collectible item in 20 years when people want to remember the past. This doesn't mean you can buy the top 10 products in a consumer survey, keep them for 20 years, and then sell them for a fortune. If that were the case, every pack of rats would be rich. So what's the takeaway? Some items this year will become collectible if they meet two conditions: rarity and desirability.
For products of the last century, scarcity is more difficult because mass production allows demand to be (over) met without additional cost. As more product lines are introduced, the value of Beanie Babies is decreasing. While it's in the company's interest to sell as many products as possible to meet demand, that mindset denies collectors the opportunity to make a profit in the future.
Appeals are difficult to settle. To make money with collections, you need to predict what will be popular later on. Perhaps the object is not in such demand now, but it will become even more popular in the future, because it is rare or not yet fully appreciated. For example, in the 1950s and his 1960s, wingtip plastic sunglasses with glass lenses sold for a few dollars in drug stores, but now they fetch hundreds of dollars on the collector's market.
Why you shouldn't buy collectibles
Like anything else, purchasing collectibles comes with inherent risks. Some are fairly common, while others are less obvious. Here we list some of the reasons why you might hesitate before handing over your hard-earned money for collections.
markup
When you buy collectibles from dealers, they usually mark up the price to make a profit. Unlike collectors, dealers don't have the luxury of holding on to items for years until they increase in value. Because you have to sell and you have to run a business.
maintenance
Collectibles do not generate income while you own them. Waiting for the value to increase can actually eat into your other income. Collectors incur various costs before selling an item.
Many collectibles require special care to keep them in pristine condition. These costs range from $1 plastic covers used to safely store hockey cards to special rooms with moisture, heat and light monitoring equipment to extend the life of the paintings. It varies. In addition to storage costs, there are costs associated with purchasing insurance for higher-value collectibles and having the collectibles viewed by experts, appraisers, restorers, and dealers before they are sold.
wear and tear
From Pokemon cards to antique plumbing fixtures, most collectibles come with manuals that categorize how much they're worth based on their condition. For example, the popular book “The Amazing Spider-Man #1'' is only worth 30% to 60% of its list price, depending on the type and severity of wear.
forgery
Most museums display models of dinosaur fossils rather than the real thing. Can you tell the difference between an Allosaurus skull made of plaster and cement and fossilized bone? No matter how experienced the appraiser is, counterfeit items find their way to dealers and then to the collector market. . This could potentially result in you getting your hands on some very expensive criminal art.
low profit
Collectibles tend to have lower returns than stock market index funds, money market accounts, and most bond funds. If we averaged the returns of all collectibles (which is practically impossible, given that some collectibles have little or no measurable market), they compare disastrously to the S&P 500. Become. Even if you use diamonds and stamps, you'll find that even with the best return on collectibles, there's still a significant gap. At best, the return rate on stamps is between 5% and 10%.
Why buy collectibles?
Indeed, there may be many reasons not to purchase collectibles. You won't necessarily get a good return on your product, and there's no guarantee that someone will actually be interested in the same thing as you. It may seem like the only reason to buy is for your own interest. But that doesn't mean you should avoid them completely.
Remember, people don't invest in collectibles, they spend money on collectibles. If you're lucky, you can sell the same item in the future and beat the inflation for the period you owned it.
Tips on buying and selling collectibles
store heirlooms
It might smell like cat or cigarettes, but I'm not sure how much people would pay for an old snuff box. If you've received an antique or collectible from a relative, find out if it has value before throwing it away. If you don't pay anything for your collectibles, your profit margin will be much higher.
compare and call
If you have a hot collection, take the time to call other dealers and find out prices for similar items. Sure, there will always be two interested buyers the next day, but you shouldn't make a quick decision under pressure from the dealer. Your best bet is to visit the store and call the dealer when you get home. You will be able to think more clearly and have fewer regrets in the end. If possible, buy from other collectors (preferably trade). They assume you have the same pricing guide as them, so you're less likely to mark up your items.
Request a written guarantee
If the collectible is truly an “incredible purchase” from “a few interested buyers,” ask the seller to write a buyback guarantee for an agreed period of time. After all, the dealer can buy it back at the same price and then bang on the window and sell it again to all interested buyers.
Find out for yourself
pick out Kovels' guide to selling, buying and repairing antiques and collectibles (or other guides written by Ralph and Terry Kobel) or another collector's publication for the items you need. The literature includes price guides, as well as information on how to care for collectibles and in what markets they should be bought and sold.
Consider collectibles insurance
Keeping in mind the risks associated with owning valuables, it may be worth purchasing collectibles insurance. These policies protect your collection from potential incidents such as accidental damage, theft, flooding, and other types of losses. This kind of protection may be essential for owners of valuable items, but your collection doesn't have to be worth millions to be worth insurance.
Are collectibles a reliable investment compared to traditional investments like stocks and bonds?
Collectibles are considered alternative investments and are generally less reliable investments than stocks or bonds. However, of course it depends on the stocks and bonds in question. Its value can be more subjective and can fluctuate based on collector interest trends. Additionally, they typically do not generate passive income and frequently incur maintenance costs.
What should I consider before investing in a collectible?
Potential collectors should consider maintenance costs, the need for adequate insurance and product safety (if applicable), the risk of counterfeiting, and the potential for lower returns than other investments. You should research the market for the collectibles category you're interested in and have a personal interest that you can get paid for in case the market doesn't.
What is your most valuable collectible?
Some of the most valuable collectibles include rare art, vintage cars, antique furniture, historical memorabilia, and first edition books. Categories that can command high prices include Honus Wagner baseball cards, rare comic books like first editions of The Amazing Spider-Man, and unique historical artifacts. Their value depends on their historical significance, rarity, and condition.
conclusion
There are more reliable ways to hedge against inflation. Collectibles are illiquid, taxed investments that provide no income and can lose value if dropped. If you buy, make sure it's something you'll be happy to own forever, rather than hoping for a big sale in the future.