Collectibles as an investment is an interesting idea, but ultimately they fall prey to one of the major rules of any financial endeavor and economics 101: things are only worth what someone else is willing to pay for them. You might spend $100,000 on Beanie Babies hoping to put your kids through college, but if that market goes away, or more likely, people aren’t willing to pay thousands of dollars for a Beanie Baby, then you are going to end up taking a major loss. Never mind the fact that $100,000 in and of itself could easy pay for a college education at a state school.
If you do a search on the internet it is not uncommon to find articles such as the following:
- The Simple Dollar – Can Investing in Collectibles Really Work?
- The Wall Street Journal – The Experts: Is Collecting in Collectibles a Recipe for Disaster?
Which are just two that were grabbed doing a very short search that basically say the same thing in that you might make money if you are diligent and don’t get attached to what you are collecting you might be able to make money, but more often than not, you will lose money or break even. Also, as both articles point out, collectibles tend to have an attraction that causes you to what to collect them in the first place and that attraction can cause you to hold onto something past the best time to sell it. In this case though, I’m attempting to address people that are seeking out collectibles as an investment vehicle as opposed to monomaniacal collectors such as those described in “Collecting: An Unruly Passion: Psychological Perspectives”
Now, none of this is to say that you can’t make money via collectibles and I’d be lying to say that I haven’t done so myself. Back when the BioShock video game (a good one by the way that I recommend playing if you have not) was released, there was a collectors edition that included a statue. Due to defects in packaging a large number of them were damaged and 2K Games sent a print copy of the art book, “Breaking the Mold: The Art of BioShock“, to purchasers as an apology. As it turns out, this art book now sells for over $100 on eBay in mint condition and I recently sold a lightly worn copy for $71. Had I have kept the copy of the collectors edition of the game instead of donating the statue to charity I could have sold that on eBay as well. This is where the warning in the title to this entry comes into play though, I believe that I paid around $70 for that collectors edition game back in 2007 and according to eBay and open but complete copy is selling for around $50 to $75 on eBay and a sealed copy is selling for around $125. Obviously in the this case you are losing money with the open copy, but it’s a video game and is meant to be played.
However, these are newer games and the markets tend to fluctuate a lot. Even more so since BioShock Infinite was recently released (another good game by the way). So what if we look at the historical picture with regards to video games, one fairly famous game when I was younger was Valkyrie Profile. This wasn’t a very high profile game back in the day, but among players of RPGs it was known and generally recommended as a good game to play. When sold used at specialist stores it could routinely be found for a price of about $100. So how is the game trending these days?
Well, it appears that the price has gone down over the years and right now copies can be found on eBay for between $60 and $100. So that means that if you bought it 2002 (when I remember seeing it for $100) then you would have lost $29.85 to inflation assuming you are able to resell it for $100. Granted you have the conundrum that sealed copies sell for major money, but the questions is, will it last?
A lot of this entry has been focused on video games, but that is in part because I have been selling off some of the video games that I have accrued over the years. Another item that I recently sold off? Mint and proof sets of coins that I got a box of at an estate state. Now coins are billed as an investment, i.e. The Expert’s Guide to Collecting & Investing in Rare Coins: Secrets Of Success and countless other books out there, but the sad fact is that when coins are sold as an investment, they usually aren’t. If you examine the issue price versus the average value of mint sets and proof sets you will find that they just don’t hold their value. I might have been able to get a box of them and sell them on eBay at a nominal profit, but that is largely because I didn’t pay much for the box and I did a lot of hard work to list them all individually. Had I had bought those sets direct from the US Mint or from a dealer over the decades that were represented in the box, then I would have netted a substantial loss.
However, what about just coins in general? Well, this is another situation where a lot of issues come into play:
- How rare is the coin?
- What is the coin made of?
- Is it a popular coin?
Obviously the rarer the coin the more a collector might be willing to pay for it; however, the composition of the coin also plays a role. As you might suspect, a common gold coin can be worth substantially more than a very rare copper coin due to the value of the gold. Finally, the popularity of a given coin also has a lot to do with things, an uncommon coin from a popular series (i.e. Morgan Dollars) can actually sell for more than a rare coin from an unpopular series. At the end of the day, the value of coins are highly subject to the whims of collectors along with commodity traders. In fact, most of the investment advice you find when it comes to coins is to buy high grade key dates and leave things at that unless you are interested in it as a hobby.
This is just two examples in a very vast field given how many things people collect, but one item to note is that people also for pretty much everything that you can collect, you can find a price guide on Amazon for it. This is something at I have always found interesting because compiling those books cannot be easy to compile and yet, there they are. So clearly there must be money to be made in publishing them.
So where does that leave us? At the end of the day, the title of this article is “Don’t by collectibles as an investment” and I generally stand by that bit of advice for a number of reasons:
- Collectible markets can be very volatile and can go away, as shown by the Beanie Babies.
- Collectibles are illiquid, selling them is easier with the internet, but can still be hard.
- Collectibles don’t provide a source of income while you are in possession of them.
Incidentally, these reasons are very similar to the ones that Investopedia list. However, if you think about it, they do all make sense, just because something is popular today doesn’t mean it will be tomorrow at which point your investment might not be worth anything. Furthermore, you can’t really retire off of the income that collectibles offer while you own them. A painting by Monet might be worth several million dollars, but you aren’t going to see that money until you sell the painting. Collectibles with a long track record (e.g. art, coins, etc.) might hold their value over time due to continuous demand for them but outside of very limited situations, I’ve yet to hear of anyone getting rich in this day and age because of collectibles.
So at the end of the day, collect something because it brings you enjoyment, not because you think you might be rich selling it in the future at some point. Odds are you will not.