Collectables have been a popular investment option for many years. Who are they appropriate for?
Collectibles have become increasingly popular over the last several years. Collectibles are a tangible asset that are valued for their rarity. This includes everything from baseball rookie cards to paintings by Renoir.
Collectibles have several special problems as investment vehicles. First there is the question of liquidity. You buy a baseball card from a dealer today for $10, you go to sell it back tomorrow and he offers you $5. It’s a very illiquid market. Second is the question of whether you are buying the real thing. Frauds are commonplace in the collectibles market. For example, Ted Williams’ (the great baseball player) son has estimated that only 20% of the Ted Williams autographed items are autographed by Ted Williams. Third is the question of changing tastes. If Beanie Babies or 1965 Mustang convertibles fall out of favor, your investment could go down and stay down.
What this means is that in order to become a successful collectibles investor you must become an expert. You must be able to judge a fraud, find markets to buy and sell items without huge dealer markups and be able to judge the trends of what is (and will be) popular. Some expert collectors do well. Most amateur collectors lose their shirt.
Does this mean you should never buy collectibles? For pleasure, of course you can. The best advice I ever received about buying art was “Buy what you like and don’t worry about making money on it”. If you want to have a complete set of Monkees lunch pails because it will be fun, then go for it. But for investing, leave it to the experts, or become an expert.