There are so many reasons why collectors collect. It could be a deep nostalgic streak or passion for a cultural touchpoint. These sorts might turn a profit someday, but that’s not really their goal. Instead, it’s all about the thing itself. But there are plenty of folks who get into collecting as an alternative form of investing. We’ve all heard about the unexpectedly high prices that collectibles can fetch at famous auction houses–for that collector, a sale is a major windfall that could fund their future.
The trick lies in knowing (or trying to know) whether what you collect today will yield a profit tomorrow. The parenthetical is your hint–it’s not always straightforward. We’re going to touch on some major things to keep in mind as you set out on the collecting path.
What Are Collectibles?
Before we get into it, let’s define terms. Truth be told, anyone can collect anything, but that doesn’t always make it a collectible. For items to fit that definition they need to appeal to a wide enough array of folks, and there needs to be a demand. Like anything, you’ll find trends here too. But there are some tried-and-true choices to fall back on. Think art, vehicles, stamps, sports cards, memorabilia, and more. Ideally, what you choose to collect would coincide with your existing passion, because you’d likely have a natural interest and acquired knowledge base. But that isn’t mandatory. You’ll probably come to love it (and become a self-proclaimed expert) one way or another.
Pros of Investing in Collectibles
A common characteristic that many collectibles share is that they are often worth more than their original sale price. And their value tends to appreciate over time. These two factors alone could get your investment wheels turning. That’s how they can be seen as an alternative to traditional investment products like stocks, bonds, cash, and real estate. Though unlike these common investment strategies, collectibles typically don’t have any intrinsic value.
You can get the reward of collecting, while also knowing that should you sell, you can maximize returns. It’s an emotional market, but it could be the perfect place to plunk down your cash.
Here are a few more positives to get you in the collecting mood:
Diversification: Collectibles help you to spread your eggs between baskets.
Portability: Collectibles are often tangible and easily transported.
Aesthetics: Collectibles can be enjoyable to interact with or display while you own them.
Fun factor: Collectors thrill in the hunt as much as they do owning items.
Accessibility: Collectibles are readily available via online marketplaces and local stores.
Things to Keep In Mind
Folks in the collecting world like to say that there are nostalgia cycles that can help to predict what might be hot in the next few decades. But it’s not as simple as counting backward 20 or 30 years to know what should be popular at the moment. There may be some clear contenders, but not every toy, gadget, or cultural phenomenon easily translates into top collectible status.
Condition matters too. Nostalgia gets you pretty far, but once you’re ready to resell, the price will be wholly subject to the quality of the piece and current availability in the marketplace. A few scratches, a missing component, or an open box could mean the difference between recouping what you paid and a life-altering sale.
One big threat in the collectible world is fraud. Look, it’s a given that anything of value will be seen as fair game for ripoffs by no-good fraudsters. It’s critical to get with peers who know what’s up and who to trust before diving in headfirst and investing your savings. Vett, vett, and vett again before dropping your hard-earned cash. Here are a few more things to keep in mind as you begin your collecting journey:
Markups: Collectibles dealers often mark items up because this is business, and they need to turn a profit. Knowing the current prices for the items you seek can help.
Illiquidity: For collectibles to yield a profit, you’ll need to find a buyer, you can’t simply cash them in.
Condition: Collectibles can have sentimental value, but any amount of damage can drastically affect the price you’ll fetch.
Storage: Collectibles must be stored properly as recommended by professionals to preserve value.
Maintenance: Regular inspection of collectibles and supplies to store them can cost time and money.
No Cash In: Collectibles only make you money when they sell, they don’t offer regular dividends or monthly installments.
Returns: Collectibles in general have a much lower return rate than traditional investment strategies.
Protecting While Collecting
Long story short, grandpa’s stamp collection might not be the best retirement plan, but it sure makes for a potentially profitable supplement. It’s also just a fun and wholesome pastime to enjoy with friends and family. Whatever you love to collect, if you’re going to use it as an investment, just know that you’ll need to pay attention to some details along the way.
Don’t rush it. Take time to compare prices and call around before making any rash decisions. If it feels like dealers always have the upper hand, try buying from or swapping with other collectors.
Get it in writing. If you buy a collectible from a dealer who claims it’s an unbelievable buy and that several buyers are interested, you can always ask for them to draft a buyback guarantee. If you rush into it under their pressure and change your mind once you own it, you aren’t stuck.
Sign up for insurance. If you’re serious about collecting and you can’t afford to replace your collection in the event of a loss, then collectibles insurance is a no-brainer. Homeowners policies typically cover collectibles at their actual cash value, not market value.
Do your research, know your collection inside and out, work with folks you trust, and purchase intentionally–we know you’ll make a great collector! And if you do all the legwork, there’s a greater chance that someday your collecting will seriously pay off. In the meantime, while you’re amassing your one-of-a-kind, truly unique, so very personalized collection, be sure to have protection in tow.
Get in touch with a Protect My Collection by Zinc Insurance specialist today to get a quote and learn how we’ll protect you at home, on the road, and at shows. Onward and upward!
