Collectibles As An Investment

By: Laura du Toit
During times when stock markets are in a slump and the economy is shaky people turn to investing their monies in other commodities that they perceive to be stable investments and almost guaranteed to increase in value. A large number of new entrants to the collectibles market suggest that this market is seen as a safe market for investment.

If a potential investor is looking to invest his money in coins or jewelry then he has a relatively good chance of making a sound investment. Most other collectible markets are not immune to current economic pressure and should be recognized for what they are – a great hobby and not the best investment if the sole purpose of the purchase is to try to make money.

This does not mean that during an economic slump collectors should sell off their prized collection – this could in fact detract from its value in difficult times. The problem lies more with new collectors who have the misconception that most collectibles can be turned into an investment. The only people who really make money in collectibles are the veteran collectors who can afford, and are willing, to pay exorbitant prices for an extremely rare item of superb quality and are knowledgeable about the market that they are dealing in. There are a few other collectors who are fortunate enough to need to sell their collection when the market for that type of collectible is at its peak in their favor. This unfortunately is a rarity and most collectors are not that lucky.

If the investor feels confident in a particular collectibles market there are still two factors that will influence the investment potential of any collectible item:
• There must be a limited supply of that particular item.
• The second factor is a bit more difficult to ascertain and that is that the current demand for the item must not be based on short term speculation but that there will be a growing demand for the item over the long term.

The risk associated with investing in collectibles is aggravated by the fact that most of them have no fundamental value. Appraisals may be a good indication but are no guarantee of the underlying value of a collectible. Current trends and investor sentiments have a huge impact on prices in the collectibles market and tailwinds are a frequent occurrence in these markets. There is always the very real risk that what collectors regarded as an absolute must-have today will be forgotten by tomorrow. And how can anyone predict the trends of collectors?

A true collector very rarely parts with his collection but investors may find themselves is a position where they need to sell their investment to gain liquidity. This of course is every dealer’s dream and the chances are good that these collectors will be paid the true value of the collection is proportionately reduced by the urgency of the sale.

The happiest collectors are those that motivated by the fun and enjoyment they derive from collecting. Those that enter the collectible market for investment purposes, and whose sole motivation is profit, may run the risk of having a very unstable investment portfolio, more so if they are not experts in the particular field of collectibles in which they have invested.

Laura, an avid doll collector invites you to read the following recommended reading:

Evaluating Collectibles - What You Should Know,

Planning a Doll Inventory