Can You Invest Successfully in Collectibles?

Collectibles such as art, memorabilia, various antiques, and even things like comic books and baseball cards, have long-held the promise of great financial reward for the person fortunate enough to own the right piece. The popular PBS television program Antiques Roadshow has gone a long way to excite the masses with the idea that the dusty, old painting received from kindly Aunt Martha years before, and now sitting alone in the otherwise-empty closet of a spare bedroom, could be akin to possessing a lottery ticket with the right five numbers. In point of fact, collectibles can, on rare occasion, provide rich financial reward, but is it the reality that such can happen with enough frequency that it’s appropriate to see collectibles as bona fide investment vehicles?

The short answer is "No." Collectibles can be handled successfully as quasi-investments by the right person…but, unfortunately, that is not likely to be you. That brings us to one of the primary problems with investing in collectibles: most people simply do not possess the keen acumen necessary to do it well. Because there is no truly active, efficient market (more about that in just a bit) for collectibles, it is simply not possible for Joe Average to have good and current information about the value of collectible pieces. This means that those with the right knowledge are experts, people who deal basically full-time in the unique realms of the different collectibles in which they specialize. There’s no middle ground here – either you know nothing, which applies to the vast majority of people who embark on this path, or you are an expert. The same cannot be said of more traditional, mainstream investments like stocks and real estate, where acquiring the necessary knowledge to buy and sell those assets profitably is easier, relatively speaking.

On this same note, let’s go back to this matter of “active, efficient” markets. What does that mean? Using the stock market as an example, we know that information about both the underlying fundamentals, as well as the technical indicators, of stocks is easily accessed; a stock investor has the information he needs, 24 hours a day, to make informed decisions about companies he’s thinking of buying or selling (some might argue that point, but it is largely true), whereas no such market exists for collectibles. There is not a fine art exchange, where you can check the price of Vermeer’s The Milkmaid against Boucher’s The Bridge in order to decide which is the better value – it just doesn’t work that way.

This lack of a true marketplace causes other problems, as well, for the hopeful collectibles investor. In addition to the dearth of useful information about value, it also means that it can be a distinct challenge to sell your pieces. Not only must you be fortunate enough to find a buyer who, for starters, is interested in the very unique item that you’re wishing to sell, but then your buyer has to be willing to pay what you want for the piece, and that can prove to be a real problem; that antique chair you purchased for $5,000 may be of interest to someone, but are they willing to pay even as much for it as you did?

Ultimately, investing in collectibles is less true investing, and much more speculation. There is nothing wrong with speculation, as long as you’re aware of the difference between the two. There are people who can move nimbly and profitably among collectibles, but if you want some insight as to how they do it, tune in to shows like History Channel’s American Pickers and Pawn Stars; watch how few items they actually purchase from people who have mountains of stuff, and when they do buy, note how they buy at well below retail. Why do the collectors sell for that? Because the professionals with a storefront and access to a ready, ongoing market have the upper hand – the average guy with a few collectibles in his attic simply does not have the ability to get the same price, and he knows it. Buy collectibles because you like the pieces, and if, down the road, they have appreciated in price, wonderful, but as far as your investing goes, stick to, well, investments.

The information contained here is for general information purposes only. The Financial Writer blog and Bob Yetman disclaim responsibility for any liability or loss incurred as a consequence of the use or application, either directly or indirectly, of any information presented herein. Nothing contained in this article, or any other article featured at this blog, should be construed as a solicitation or recommendation to engage in any financial transaction. You should seek the advice of a qualified professional before making any changes to your personal financial profile.

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