We’ve all seen it happen before: that magic, million dollar item on shows like Pawn Stars or the Superman Issue #1 that sells for thousands. Collectible investments can sound very attractive; simply collect something you like and as it grows in age, it should also grow in value. But there’s more to collectible investments than meets the eye. That’s not to say you can’t invest in collectibles; there’s just some important information to be aware of.
Collectible investments are high risk
The first thing to be aware of, is that collectible investments typically carry a very high risk. For every famous comic book selling for returns in the thousands, there’s someone paying hundreds for an action figure that will be worthless in a year. The value of collectible investments is almost entirely based in speculation. There’s no solid way to assess their value in the future. This means that your potential returns are based entirely on the demand for that product when you sell, which is rarely predictable in advance. It’s all guesswork essentially and the risk of losing your initial investment is entirely possible. If collecting is something you enjoy, that may not be a problem. However, if you’re banking on those same collectibles to fund something like retirement, it might be worth doing some research.
Collectible investments require care
It is also worth noting that collectible investments typically require careful maintenance to maintain their value. This may be something as simple as leaving the collectible in its original package, or as complicated as keeping it in a temperature, light, and moisture controlled storage area (which of course is not cheap). There’s a chance the cost of maintenance could even exceed the return on the item, but it must be done to retain quality. A collectible with even a little bit of damage can drop tremendously in value. Again, this may not be a concern if it’s something you like collecting, but if you’re looking to get monetary value out of your collectibles, it’s worth considering the added costs.
Collectible investments vary widely in value
Just because you see someone selling a similar (or the same) item for a decent return doesn’t mean that you’re guaranteed the same return. As mentioned above, even a little damage can sink the value of a collectible. Additionally if the market is unfavorable, you may not be able to even sell it at all. Even something as simple as getting the item appraised can carry some sizeable fees, which doesn’t even take into account the fees that may be associated with selling the item in the first place. There are a lot of factors that go into the potential returns from collectible investments and also a lot of ways to reduce said return. It’s this inconsistency that compounds the risk posed by investing in collectibles.
Whether or not collectibles suit your investment goals is for you to decide. As a final note, though, it is always advisable to diversify by using a collection of different investment choices to offset risk. Collectibles may very well provide you with some great returns, but putting all your eggs into one basket almost always carries an increased risk.