Despite what TV created pickers, flippers, and pawn stars would lead you to believe, investing in antiques and collectibles is not as easy as it looks. While I do not consider myself an expert in the area of collectible investments, I have learned a few things that have worked (and not worked) for me. Here are my 6 tips for investing in the antique and collectible markets.
1: Invest in what you know well
This will sound blatantly obvious but it needs to be said: It’s dangerous and somewhat reckless to invest in collectibles if you do not possess the necessary knowledge to do so. So how do you know when you’ve gained the “investment grade” knowledge necessary to invest? A simple and effective litmus test is to visit a website, store, or antique booth that deals in the kind of items that you’re interested in investing in. If the prices weren’t available, could you come close to naming the prices of the items offered for sale? If not, chances are you’re not quite ready for primetime.
In my experience, I’ve found that most knowledgeable investors have a deep-rooted history in a particular hobby long before they were considered an expert. And remember this, even if you are reasonably knowledgeable in a given area, remain humble. Hucksters love nothing more than encountering an overly confident buyer. The safest position to take is to assume that there will always be someone else who knows more than you, so tread lightly.
2: Stay current
A successful stock broker is a student of the market they invest in; always reading and researching the market to stay on top of their game. Investing in collectibles should be no different. If you notice your interest waning, chances are you’re not going to be able to stay on top of the trends and prices in the market. To put it bluntly, if you’re not interested enough to spend time keeping up with changes in the market, you shouldn’t invest in it.
Buy This Price Guide: Kovels’ Antiques & Collectibles Price Guide 2016
3: Bargain hunt whenever and wherever possible
If you go through a dealer, chances are you’re going to pay a sizable markup. Conversely, if you sell to a dealer, you will likely sell at wholesale. Instead, look for non-typical places to procure your items. Secondhand stores, flea markets, yard sales, estate sales, eBay, and Craigslist are great places to search.
With that said, there is a time and place when dealers can be an excellent option. This is especially true when you need to acquire a specific item in order to complete a collection. It’s also a good idea to keep a watchful eye on the prices dealers charge for the items that you’re the most interested in investing in¾helping you gain a better understating of the current pricing environment.
4: Keep your collectible investments under lock and key
One of the upsides in investment collecting is that you hold on to the assets. This is especially comforting when you consider what the likes of Bernie Madoff and the original investment schemer, Charles Ponzi have done with people’s investments.
However, just because your investments are in your physical possession doesn’t mean that they’re completely secure. It’s still important to take preventative security measures for your most valuable items.
The most common and secure option is a safe deposit box at your local bank. In addition to securing your collectibles, keep in mind that some may require protective cases, rooms, or sensors to monitor moisture, heat, and light. Also, anything worth securing is also worth insuring.
Lastly, you should also archive your items in a secure database, using such applications as RelicRecord.
5: Get professional appraisals for your most valuable items
Having items professionally graded and appraised will help authenticate and add value to an item. Additionally, for certain items such as sport cards, currency, and coins, the grader will also seal the item so the graded condition can’t be altered. Consider such services as an investment in your investment!
6: Stay diversified
Even a real estate investor with a degree from Trump University would tell you to diversify your investment portfolio. The financial advisors that I’ve spoken with have suggested that my collectibles should not exceed more than 10% of my total assets.
Most collectibles appreciate at a slower rate than stocks, bonds, and other investments. Another reason for limiting your collectible assets is illiquidity.
Regardless of what you collect, remember that a collection is only worth what someone else is willing to pay for it. Collectibles, and the people that collect them, can be fickle. If interest were to change, a previously hot collectible market could dry up and its prices plummet. We should all be wise enough to diversify our investments in a way that shields us from that kind of exposure.