Profitability of collectibles as investment

Factual Questions
1

Watching an Antiques Roadshow-type of programme the other day got me wondering. It would appear that stashing potentially collectible stuff away isn’t such a bad long-term investment strategy. However, appearences are often misleading, and hence I come to the Dope.

My questions are thus:

  1. How do collections, in general compare to other forms of investment?
  2. What type of collectible has provided the greatest returns?

I’d greatly appreciate cites if available. As a matter of fact if anyone has any link to serious studies done on the topic, I’d be most grateful.

What I am not interested in, however, are overly specific cases. E.g.: “Van Gogh gave this painting away for free and now it’s worth x million dollars.” I’m more interested in paintings in general, much in the same way you wouldn’t judge stock investment as a whole just by looking at MSFT.

As a bonus question:
3) Are there any notorious examples of collectibles losing value over the long term without suffering physical damage?

Cheers.

2

Silverware, because no one uses it much anymore and because it must be cleaned regularly actually depreciates.

3

This is probably playing with words but I think I’d include oxydation as “physical damage”. I’m not all that familiar with silverware conservation technology, but couldn’t you keep your collection in such a way that it won’t oxyde? In oil or in a vacuum wrap?

I don’t think not being used anymore is a factor. The last thing you want to do with most collectibles is actually use them.

Would a silverware collection in good condition from, say, the Victorian period be worth less than when it was first bought? Would it be worth less than it was worth 20 or 30 years ago?

4

My dad was heavily into the whole collectible/antique thing, and I picked up a fair amount of the basics from reading the books he had and helping him sell on eBay.

You have to be careful, because we’re dealing with three entirely different categories here:

Antiques are furniture, toys, household items, advertising…pretty much anything that was made prior to 1900 and is still in decent shape. Not everything that makes it this far in time is worth more than it used to be, but if it’s managed to endure well enough to still be usable/presentable, it usually has appreciated.

Genuine collectibles (Collectibles 1) are items that weren’t originally manufactured for the purpose of being saved or collected. Vintage toys (less than 100 years old), kewpie dolls, utilitarian tableware (like Depression glass), and objects like that fall into this category.

What I call devised collectibles (Collectibles 2) are the last category. These are items that were specifically manufactured as collectibles. Franklin Mint figurines, those painted Liberty half-dollars, Gone With The Wind plates, and all of that type of thing belong here.

Items in the Antiques category are, within reason, always appreciating as long as they retain a majority of their original makeup. The Keno brothers on Antiques Roadshow are always bemoaning a refinishing of a fine piece of furniture because it really does lower the value. As long as the item isn’t seriously damaged and hasn’t been radically restored, it’s going to keep going up as long as there are serious antiques collectors with money.

Items in the Collectibles 1 category go through cycles, but the dips and peaks aren’t too far away from each other. They have value because of rarity, nostalgia and a sense of camp, not for any inherent superiority of workmanship or material, but the arbitrary value is fairly stable because the rarity of these pieces is NOT manufactured, as they were never intended to be an investment in the first place.

Items in the Collectibles 2 category, on the other hand, are as volatile as gasoline. An awful lot of people are holding an awful lot of monetarily worthless pieces of glass/metal/plastic/paper because they were led to believe that this item or that item was the next big thing by the manufacturers who make them. I know I’ve seen Franklin Mint figurines on flea market tables selling for $10 or less. Not a good investment.

5

I have a friend who makes much of his living selling stamps to stamp collectors (now mostly done online). He says that the whole field of stamp collecting is a dying hobby, with almost all the participants being males 50 & older. He sees this as a shrinking market, and says prices of collectable stamps are on a declining trend.

If he is correct, the value of stamp collection is likely to decline over the years, because there will be fewer & fewer people interested in buying it.

6

I just want to second this warning. Anything that is brand new and advertised as “Collectible!” is to be avoided. The items that increase in value the most are the ones that are relatively scarce because hordes of people weren’t buying them as “collectibles” when they were new. That makes it really hard to predict just what will become sought-after years down the road.

To answer the OP’s bonus question:

A wife of a friend of mine has boxes full of Beanie Babies in their closet. The Beanie Baby craze ten years ago was HUGE! There were auctions and conventions devoted to the damn things. Those little stuffed animals were selling for many times their retail price. Middle-aged moms were literally fighting each other for them and racing around town to every McDonald’s offering the mini versions in Happy Meals. Now they’re practically worthless and will probably remain so since there are so many of them out there.

I got caught up in the comic book collectible craze (also about ten years ago). Now I have boxes and boxes of comics that are worth much less than I paid for them. If I had sold off many of them a month or so after buying them, I might have been able to turn a net profit. But I kept them, naively thinking their value could only increase. It was an expensive lesson, but a valuable one.

7

Unlike stocks and bonds, objects require to be conserved, stored and insured, all of which costs money. And they don’t usually pay dividends (unless you can lease them to someone), so the whole of your return has to come in the form of capital appreciation. They would therefore have to appreciate considerably faster than most financial assets before they would begin to rival them as investments.

I’m afraid I’ve no cite, and it was a few years ago, but I did read a report about a pension fund which had invested a part of its assets in artworks. They bought and sold at auction, with appropriate professional advice and, where they could, they leased out the artworks which they held. After a period – I think ten years – the commissioned a report of the effectiveness of the investment strategy.

The conclusion was that their artworks had, on the whole, underperformed their more conventional assets, although not dramatically. The pension fund ceased acquiring new artworks, and over time liquidated the collection it had built up.

The individual investor may, of course, enjoy a return other than the purely financial return. Even if my furniture and paintings do not perform quite as well as my stocks and bonds, I get to use them and enjoy them as well as benefitting from whatever financial return they deliver. Plus I save the cost of buying tacky new furniture and hideous cheap prints which I would otherwise incur. This may more than compensate me for a modest financial underperformance, but I need to recognise that my purchase and holding of furniture and paintings is only partly investment, and is partly consumption.

8

I feel your pain! I’ve been reading and collecting comics for 20 of my 26 years, but a lot of the books that were advertised as “collectible!” are now worthless, particularly those from the early 1990s (an era known for gimmicks, hype, celebration of style over substance, and a ruthless speculator market). I still have comics I love and cherish, and some that actually are worth a good bit. But collectibles are only worth as much as anyone is willing to pay for them, and comics from the last 15 years that were overprinted (and pretty crappy to begin with) depreciated more than we ever could have imagined.

9

(1) Keep in mind that those astronomical sale prices (for the stuff you see on “Antiques Roadshow”) are obtained via auction houses…and these take HUGE commissions (sometimes 30%). You can sell your items yourself, but it takes time to find a buyer.
(2) Antiques go through cycles of popularity. For example, victorian-era furniture is quite popular today-20 years ago, you couldn’t GIVE it away. Similarly, 1950’s era furniture is getting hot now…and it is scarce, because most of it was thrown away in the 1970’s.
There really is no way to learn waht values of antiques/collectables are, except by talking to experts, and reading a lot. A personal example: Jim Beam (and other American whiskey distillers) used to make fancy collectable bottles of whiskey (these would be in the form of animals, sculptures, etc.) My brother has a fair number of these…he is convinced that they will be worth something, eventually, because the manufacture of these collector bottles has virtually ceased. Who knows? maybe in 30 years they will be hot…or maybe worthless. Nobody knows!
One last thing: the huge run-upin antiques prices has spawned a huge industry in making fakes…an example is civil-war era stuff. You can buy a german-made copy of a civil-war pistol for a few hundred dollars-some are so good, that they have scratches and wear marks just as the real thing! (A real CSA pistol could be worth as much as $20,000!-beware!)

10

In general, I think they are a bad investment. I collect calculators and slide rules because I have an interest in the history of technology, not for investment purposes. Most of them sell for far less than their original price, especially if you consider inflation and interest rates. Rare items and items in unusually good condition can fetch high prices. Even then, you usually would have been better off putting the money in savings bonds. If you look at eBay, flea markets, and auctions, you will find that most things do not appreciate in value. The exceptions are items that are rare, desirable, in excellent condition and “in fashion”. How can you predict that?

11

This is something I wanted to touch on in the op, but left out somehow. IIRC a bottle of Château Margaux 2000 was worth about 250$ when it first came out. If it is kept in good condition it is virtually impossible that it will be worth less than that in 20 years. They catch of course is that you need a good cellar for this to happen.

This was the sort of stuff I was looking for.

How meaningful would it be to think of collectibles in terms similar to “high cap” and “low cap”? I mean draw a distinction between a bottle of Romanée Conti, a Picasso draft, the aforementioned Civil War pistol on one side and toys, stamps, comics, furniture, on the other. The Sotheby group vs. the E-Bay group?

12

In 1984 and 1988 in los Angleles and Seoul, Korea, I bought up kinds of pins, PLO pins etc…paid big money and now the magic is over…The pins were a bad investment Coins can be worthwhile or just take a lot of money to purchase and then someone will buy them from you. Hot as easy as it looks.

13

I see several problems with any sort of stuff kept as an investment.

First off, you buy at retail prices, but you sell at wholesale prices. Try to sell a diamond to a jeweler sometime. Why should he pay top dollar (like you did) to you when his supplier can get him ‘brand-new’ diamonds at a bargain.

Next, consider the situation with the collectable whiskey bottles. I am sure that at some point they will be worth more than you paid for them. But you have to wait for a long time, maybe decades, for that to happen.

Had you taken your whiskey-bottle money and put it in stocks, bonds, or simply paying off your personal debt, you would have made more money (at an annual rate).

By the way, anyone want my dad’s old coin collection? We are stuck with it.

14

Actually a bottle of wine could be poorly looked after since often the purchaser doesn’t intend to drink it and even if they do I would assume it is bad luck if the wine is terrible.

A wine snob friend of mine was recently telling me that the percentage of crap bottles he is getting is so high that he is thinking of not buying wines with cork closures any more.

15

Actually I was looking for cites that would show this to be true or not. UDS mentioned a report along those lines, but there must have been some sort of economic research done on the topic.

16

And there’s the point I should have brought up in my first post:

Don’t collect purely for investment. As much as some things rise in value, it’s never as good an investment over time as the traditional financial instruments are.

Collect because you like the objects you’re collecting. Your return on investment in collecting is satisfaction and enjoyment, not financial gain. My dad managed to make a very small profit on his eBay and meat-world auctions of Victorian advertising (trade cards, counter displays) and antique/vintage toys and victrolas (usually restored by his own hand). But he was seriously interested in the advertising and he loved restoring the toys and victrolas, so the small profit (and it WAS small, believe me) didn’t deter him.

On the other hand, in 20 years those shelves and shelves of old toys he left behind may well be worth A LOT. But if I could predict that for sure, I’d already be going down to the convenience store to buy a powerball ticket.

17

Wisdom, jayjay.

Make sure you truly enjoy what you collect. Because the market for most forms of collectibles are so volatile it’ll give you heart burn.

I collect two things: squished pennies and old written materials (diaries and so forth). The market isn’t particularly hot for either but I enjoy them both. Odds are my college library will get the diaries when I’m gone but the pennies will probably be passed on to the kids.

Stick with traditional investment. There’s a lower migraine factor there.

18

I strongly recommend picking up the book Objects of Desire for an excellent insight into high-end antique dealing. It’s also a fun read on its own merits.

Remember that for Antiques Road Show and price guides there’s no downside to overvaluing an object, and lots to gain by creating perception of high values.

JayJay did an excellent job of summarizing the categories of collectibles so I won’t repeat that part here. I will say, as a part-time to full-time dealer for many years, that ALL collecting areas have their ups and downs, especially during times of economic boom or bust. Jonathan Chance’s comment about volatility induced heartburn is all too familiar.

If you decide to try dealing, I suggest following the trends in the category 1 collectibles, and sell quickly rather than holding onto items as long term investments. Smart shopping can yield long profit margins in relatively short amounts of time, and as long as you don’t risk holding out for “more money down the road” you can do reasonably well if you know what you’re doing. Odds are, that road isn’t going to be long at all.

If you do want to hold things long term and aren’t too risk averse, research antique objects that have a track record of long-term price fluctuations that have recovered before and are likely to do so again. Pick up some quality material that’s currently selling cheaply but has a history of being highly desirable and with broad appeal. Watch “political correctness” trends and avoid investing in anything that’s likely to be regulated in the future. (Just try and sell antique ivory. I dare you). Erotica and “sinful” collectibles (alcohol, smoking, etc.) are usually safe bets.

Avoid collectibles category 2 at all costs. Unless you are a real specialist who can recognize an unusual case, you’re going to get burned.

Happy collecting!

19

On the other hand, my dad once put two Buffalo Bill trade cards that he got out of a scrapbook he bought for something like $5 at a local auction on eBay and managed to snag a serious collector (this man had invitations to exhibit his Buffalo Bill collection at the Tower of London coming up at the time) who paid $1,800 for them, combined. We were kind of shocked and actually emailed him and asked if he’d made a typo in his bid. :slight_smile:

20

It must be noted that the amount in my last post is NOT typical for any trade card, Buffalo Bill or otherwise. All values are subjective on things like this, and we happened (through total luck) to have two cards that a very wealthy person had been looking for for years, apparently.