Advantages and Disadvantages of Investing in Collectibles

Collectibles have a vast market, and it is estimated that the total value of collectibles from private collectors is over $1 Trillion. These collectibles can include anything like wine, stamps, jewelry, toys, fine art, classic cars, and other things. You will find different types of collectors, and it is their passion to collect items they are interested in. You will also come across many collectors who started as a child, and their passion enabled them to collect artifacts worth millions. So, does it makes sense to invest in collectibles?  Let us learn more about the collectibles and investments in them in the sections below.

What is a Collectible?

A collectible is an item not available for sale by the owner because of its rarity or popularity. These items appreciate in value because of their rarity and popularity. These items can belong to a certain category, and the owner may collect similar other things into his collection. You will come across collectors who collect comic books, stamps, toys, coins, antiques, and many other items in their collections. They store them properly so that the collectibles don’t get ruined. Talking about an example the perfect example would be action figures. These collectibles have a huge market. Some collectors may even have unopened boxes of these toys, which are extremely valuable.

How Are Collectibles Different from Antiques?

Many people confuse antiques with collectibles but remember; these are two different things. All antiques may be collectibles, but all collectibles are not antiques. Collectibles can be new and from the present generation. These can be things that were manufactured in limited quantities. An example can be a special edition Rolex watch. In addition, the value of an antique is also subjective. For example, you can look at the antique furniture passed down to the family. It is antique, but it may have little value for anyone else since it has more of an emotional value for you.

Insurance for Collectibles

Many states have collectible insurance; you must always get it for your items. This will protect your collectibles from breakage, theft, flood, or fire. The items are priceless, and we are sure you would not mind spending a little extra to protect your collection.

Factors Impacting the Value of Collectible

There are mainly five factors that determine the value of the collectible. You need to look at these aspects before buying or selling a collectible. Moreover, you will come across appraisers and experts in the field too. The factors that impact the value of the collectible are condition, rarity, authenticity, appeal, and origin.

Advantages of Investing in Collectibles

• Hobby and Interest – First advantage of a collectible is that it can keep you engaged. It can become your favorite pass time, and we are sure you will love it. If you are passionate about collectibles, you will truly feel happy with every purchase you make, and this is your true investment.
• Diversification – Adding collectibles to your portfolio will also diversify it. This way, you will have many assets available in your portfolio, and you will reduce the risk. All investors want to have a mix of assets in their portfolios.
• Appraisals – With time, the value of the collectible can shoot up a lot. There have been many cases when a collectible was sold for millions. Whenever you wish to sell something, try reaching out to the community and try to raise a bid for it.
• Social Network – You can create a social network community when getting into this hobby. The social networking community can be a rewarding and engaging outcome of your hobby.
• Confidentiality – When investing in collectibles, it is possible to maintain a lot of confidentiality. Many investors invest in collectibles because of the nature of collectibles. It helps them invest money without having to make a declaration.
• Returns from Exhibition – If you have a huge collection, then you can even set up an exhibition, and you will get returns from the exhibition. This can become a regular income source for you, and you will also get to connect with many people sharing the same hobbies.
• Low Correlation With Other Asset Classes – Most assets may have a positive or a negative correlation with the stock market. The good thing is that the collectibles have a low correlation with the other asset classes, and it usually functions independently.

Disadvantage of Investing in Collectibles

• Niche Market – Collectibles have a niche market, and finding the buyer or seller may not always be possible. You would need to research a little before every investment in this space.
• Value is Subjective – The value of the collectible is subjective, and your opinion may not match the buyer and the seller. Reaching a common ground when discussing the value may even be challenging.
• Lack of Liquidity – As mentioned earlier, there is a lack of liquidity when it comes to collectibles, and it may not be possible to find a buyer immediately. So, in an emergency, you may be unable to liquidate your funds. It can even take years to find the right investor for your collectibles.
• Highly Volatile – The collectible market is very volatile, and the value may appreciate or depreciate quickly. It can depend on multiple factors, and predicting the volatility in this space is challenging.
• Storage Cost – The storage cost associated with the collectibles can be high. You will have to spend money for proper storage, which is proportional to the item’s size. In addition, you will have to preserve the collectible properly so that it doesn’t get impacted by the elements of nature.
• Counterfeits – There are many counterfeits available, and people go to lengths to sell you such counterfeits. In such a case, every investment comes with an underlying risk, and you must be very careful before investing in a collectible. You must always get a certificate of authenticity from a trusted organization.

Final Take

This is all about investing in the collectibles. You can look at the pros and cons in detail and take a call accordingly. We recommend entering this space only if you are very passionate about collectibles. It would need significant investment and time to procure and store collectibles. So, based on all these things, do let us know your plans regarding investment in collectibles and what you are trying to procure.