Investing in Collectibles

Nov 27, 2007 by

Some people choose to invest their money in collectibles such as art, trading cards, cars, and items owned by celebrities. Is it wise to invest in collectibles? Well, for any investment to be a good investment, it must have a higher rate of return on average than the alternate investments available to you, for the same amount of risk. If it is more risky to invest in a baseball card than in a Treasury Bill, you would need to expect to receive a higher rate of return from the baseball card due to its higher risk.

 The problem with collectibles is the chance that they will eventually be worth nothing. A trading card salesman once told me, “It does not matter what price a card is worth in a guide. It is only worth the price at which you can sell it.” Whether a collectible appreciates has to do with the demand in the market, and the amount of supply that exists. If there are a lot of the item for sale, prices will be lower than if it is scarce. Also, tastes may change over time. Art that is considered interesting today may be viewed less or more favorably in the future. Items labeled as “collectibles” at the time of production are unlikely to appreciate if they are produced in large quantities, or are of limited demand from the market.

 My computer collection, Magic card collection, and Marvel card collection all have not appreciated. In fact, my collection of historical computers has probably depreciated over time. Why? The computers are not particularly scarce, and their utility decreases as they become more obsolete.

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1 Comment

  1. Jan

    I agree with your article regarding the value of collectibles. One point to make is that the person may have had great satisfaction just doing the collecting, comparing and the “hobby” aspect of the venture. From my own experience, my husband has invested quite a bit in collectible model trucks, such as the typical 18-wheelers you see out on the highways, representing well-known companies. However, when he decides to unload his collection, sure enough….the trucks will only be worth what someone else is willing to pay for them at that point.

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