What You Need to Know with Collectibles as an Investment

by Thursday Bram · 12 comments

In theory, at least, you can pick up a few collectibles, put them somewhere safe for several years and then sell them at a profit. But, in reality, using collectibles as an investment can be a complex process.

Everybody remembers Beanie Babies, after all. For several years, it seemed like everyone was collecting Beanie Babies. A friend of my mother’s had thousands, claiming that when she sold these toys, she’d be able to put her children through college easily. Now, though, you can barely give them away. The company behind Beanie Babies literally made millions of the little toys, followed closely by a string of competitors. Worse, many people held on to the toys, meaning that there are a lot more Beanie Babies out there than people willing to pay money for them. Sure, they’ll be worth something some day, but that day is probably a century in the future, when most of the existing Beanie Babies have gone into a landfill.

There are collectibles worth a lot of money: fine art, wine, a few select baseball cards and so on. The rule to remember, though, is that something has to be rare and desirable to be worth anything. A painting by an artist who turns out a new piece every week is far less valuable than something by Michelangelo, because there’s relatively little left available from Michelangelo’s time. But you absolutely need to know what you’re doing before you get into the collectible market.

With Collectibles, Knowledge is Money

With most investments, there are rules to keep investors from getting into trouble. The SEC controls stock investing fairly closely, so that an inexperience investor won’t get taken for a ride by a greedy broker. But with collectibles, you’re entirely responsible for protecting yourself. There’s no one looking out for you.

If you don’t closely study your market before you buy anything, you can wind up buying a fake, something that isn’t all that collectible or an actual collectible for far too high of a price. You basically have to be an expert before you lay down your money if you really want to turn collectibles into an investment.

There are appraisers and experts who can help you decide on the value of a given item: when dealing with fine art, for instance, it’s commonplace to bring in experts to check that a painting is not a fraud and to set a price. Of course, those experts cost money and you have to be able to trust their opinion — the more you can confirm on your own, the better. Those expert opinions are especially important when you’re selling a collectible. You can always sell a collectible for more if you can guarantee it’s the real thing.

Collectibles Aren’t Like Any Other Investments

The average investment brings you income after you buy and before you sell it. A stock, for instance, may bring you dividends, while a piece of real estate may bring you rental income. A collectible, though, just sits there. It may even cost you money as you have to store many collectibles appropriately — wine, comic books and antique cars really shouldn’t just hang out in your garage while you’re waiting for their value to increase.

Furthermore, collectibles are incredibly illiquid — it’s tough to turn them into cash. In order to get full value, you usually have to find a collector who wants the piece. Someone who isn’t passionate about their collection simply won’t pay you top dollar. It can take years to find the right buyer for even a particularly valuable collectible. You can sell some collectibles quickly, often through pawn shops and the like, but you’ll almost always take a loss. Beyond pawn brokers, it’s also very difficult to use many collectibles as collateral for a loan if you do need cash quickly.

Are Collectibles Really Worth the Hassle?

There are some collectibles that will sky rocket in worth over the years. You have to know your market very well, though, and be able to tell why a given item is going to increase in value — and, no, ‘because everyone’s buying them’ doesn’t count.

You also have to be able to afford to wait years (or even decades) before to cash in. In most collectible markets, appreciation happens over the course of decades. If you want to make money through collectibles, you can’t afford to cash in early. But, if you can afford the wait, there may just be a nice chunk of change for you at the end of the tunnel.

David’s Note: My dad kept reminding me that I loved breaking his collectible train sets when I was a toddler. Before I was 10, I was into collecting stamps, and I have no idea where they are now. I was into baseball cards during my teens and I believe they are in (of all places) my uncle’s basement in Canada. Now that I think of it, I remember hearing my uncle’s house having a floor a few years back. Safe to say that while I probably had some hopes of profitability of every collection at one time or another, those turned out to probably be the worst investments of my life. Do you collect anything? Anything for profits you want to share?

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{ 12 comments… read them below or add one }

Ann March 2, 2011 at 7:24 am

Folks my age (55 and up, I’m 59) tend to enjoy the things we had growing up. This even includes low-tech kitchen tools like wood handled tea strainers, manual cheese shredders, iron cookware, old time dishes such as blue onion pattern, and other reminders of a quieter time and age. Even old tricycles and red wagons are collectible by some folks. I think if a person is going to start down the “collectible path”, you should go with things you already love. I love sewing machines and have a lot of them, mostly toys or miniatures, but also a couple of full size ones — an old treadle machine, for instance. I love the look and gracefulness of the old black sewing machines with their gold paint designs. Those machines are like works of art as opposed to the more mundane, utilitarian machines of today.

My sister, who is a photographer and uses digital almost exclusively, loves old film cameras and has a beautiful collection of them in her spacious office. Some were gifts and some she found at flea markets or yard sales. Not much money invested for a collection she adds to periodically, yet is part of the history of photography.

If there is something you really love and enjoy owning, then that should be your collection. It may be that eventually, your collections will be valuable, but to go out looking for a lot of junk you really don’t like that well means you will eventually just discard it for nothing. People become experts on what they love the most, and that’s where collections spring from. (NOT Beanie Babies, which was a passing fad.)

Silver threads & Golden needles to you all. :)

Ann

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Money Beagle March 2, 2011 at 7:29 am

The Internet caused the bottom to fall out of most areas of the collectibles market. Before that, pieces that got ‘retired’ or were limited edition were all but impossible to come by. Limited editions, especially, would be spread around geographically by the companies, making supply limited in areas of high demand, driving up the prices. Once the Internet made selling and listing these pieces easier, there was more availability and the prices stopped rising.

I have some Dept 56 villages. I used to love seeing how much they were worth in addition to enjoying them every year for the holidays. Now, they aren’t worth all that much more than what I paid for them, but since I bought them more for the enjoyment factor anyways, it’s all good with me.

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Elton Sites March 2, 2011 at 7:41 am

Actually, investing on collectibles is one great hobby and also a great investment really. But it really depends on what kind of collectibles you are going to invest in. But as long as those collectibles do not depreciate. You are just in the right track.

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marci357 March 2, 2011 at 8:07 am

Indian Head Pennies.
I was given a bunch by my grandmother when I was just a kid, back in the 60′s.
So I have this collection – but with inflation, they probably lost value :)

But – they are sentimental too – a family heirloom – so I enjoy them and memories of my grandmother.

I think I mostly collect things I like, enjoy, and have good memories associated with. Trolls from the 60′s, yellow and orange tiny records for an old record player, old postcards, old photos, old silver steak forks (which I use), metlox daisy dishes, which I also use.
I think if something brings you happiness, use it – happiness is more valuable than the monetary value of it…. and if it breaks, well you can’t take it with you when you die anyway :)

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Bargaineering March 2, 2011 at 11:57 am

Those HGTV and History Channel shows about “pickers,” people who search for antiques, is really eye opening when it comes to showing what is valuable and what is not. Far too many “collectibles” are mass produced, making them common place and not as valuable. The stuff that goes for big money on those shows ends up being very unique items that stood the test of time and were produced in an era when you couldn’t mass produce items as easily as you can today.

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MyATM Holdings March 2, 2011 at 12:10 pm

Collectibles can be an investment but you have to wait for years or decades just like what the writer said. I know some people who are collecting for the love of it without a plan to sell it in the future. They pass it to the next generation of their family instead.

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Jenna March 2, 2011 at 2:36 pm

I collect things that are important to me that I don’t necessarily care to sell as an investment. However, I do have a grandmother that is holding on to a pretty intense Beanie Baby collection.

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KM March 2, 2011 at 5:11 pm

I collect (mostly international) money, but only for sentimental purposes. Money from places I haven’t been to and didn’t get back as change after buying something doesn’t really mean much to me. And I have some awesome rocks/minerals from the region where I was born – I like geology and their origin means a lot to me. I am pretty picky about what I collect and it has to be small too…I don’t like clutter.

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indio March 3, 2011 at 6:24 am

I came across a Hamilton watch in an antique store 25 years ago. Even though it didn’t work I bought it to wear as a bracelet. Over the next five years, I bought a few more watches and soon it became a collection. One day I decided to get the watches fixed so they would have a functional purpose. That’s when I found out that the first watch was a white gold 1940′s ladies watch. It start out being a watch collection but turned into one over time as I found things I liked at thrift shops and flea markets. Now that I’ve researched them, I actually know what I’m buying.
As a kid I had the requisite stamp and coin collection, which was more of a hobby than something meant to grow in value. I’m encouraging my kids to do the same.

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SavvyYoungMoney March 3, 2011 at 9:56 pm

Like David, I was never patient enough as a child to wait for my “collectibles” to appreciate in value before I lose interest and forget about them. I guess it’s not for the faint of heart (or children in general). A lot of things are hyped up to be collectibles as a marketing technique, but they usually turn out to be fads. The hard part is to separate schemes from the real deal. You need some great instincts for predicting trends (probably more so than real estate and stock market) to do this.

P.S. I started reading that bit about Beanie Babies while I was watching an episode of CSI about hoarders. haha. Don’t turn collecting into hoarding if there’s ultimately no value in your investments.

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Monroe on a Budget March 7, 2011 at 3:52 am

I like Barbie dolls and have quite a collection. I didn’t buy them to make money, I bought them to enjoy.

It is surprising how many people will remark, “Oh, I bet you could get a lot of money for those dolls.” Answer: No. I’ve bought some dolls on the second-hand market during the past couple of years where the price is down drastically from what even the original retail price would have been.

Lucky me: I get some neat dolls at cheap prices.

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Angela March 8, 2011 at 6:54 pm

I collect stamps & have since I was 10. With anything collectible, just make sure you love it. If you don’t love it, it’s nearly pointless to make an investment because you won’t hang onto it long enough to see it appreciate in value.

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