The Collectible Investment


It’s pretty easy to look at my net worth and believe I’ve only held a high-paying jobs, never had any student loans, and never-ever made financial mistakes.  You’d be wrong on all counts.

Nope, I started out life pretty much a financial disaster.  I grew up in a area of the world with only low-paying manual jobs.  I even needed student loans to attend college (and it took me 5 years to graduate!)

When it comes to financial mistakes, I’ve made my share of really terrible investments.  Mainly in my younger years.  Those initial attempts at investing were some of my worst financial mistakes ever…

So what was one of the worst?  I use to dabble in collectible investing.

 

An Early Collector Of Things

It must be human nature to collect the things we love.  A younger less-frugal version of myself used to be a big collector.  I started my very first collection in grade school, with a collection of baseball cards.

As with many things that kids do, I started collecting baseball cards mainly because my friends did it.  They had big collections of those little cardboard rectangles and they convinced me that someday those cards were going to be worth big money.  I liked the idea of having more money, so I started doing it too!

I’d occasionally trade the cards with my friends, but baseball card collecting mostly involved buying them with birthday money, and then placing them in protective plastic sheets.  After that, they got stored in a box and forgotten.

I don’t think I looked at those baseball cards once over the next twenty years.

My second big collection started when I entered my teenage years — I collected comic books.  At first, I mainly bought comic books because I enjoyed the art and the imaginative stories (primarily Marvel and Image comics).  Eventually though, I started collecting the rare editions which really consumed any pocket money I had.  Just like the baseball cards, I’d read the books (maybe once or twice) and then they’d go in the protective plastic sheeting to be stored and never looked at again.

The hope was that someday these comic books and baseball cards would be worth more money than I initially paid for them … if I held on long enough and took good care of them.

Back in the day, this was the kind of thing I considered an investment.

 

The Wakeup Call

For the longest time I simply stored my collectable “investments” at my parent’s home.  This made sense when I was going to college of course — I had nowhere else to store them.

Eventually though, I graduated from college and got a place of my own.  Right around the same time, my parents decided to downsize into a smaller retirement home — and that’s when I got the call.

“Hey, we’re cleaning out your old room and selling the house.  Come pick-up all your old boxes of stuff.  It’s mostly your old comic books, baseball cards, and other junk.”

After schlepping all those boxes of stuff back to my small apartment, I realized storage space was at a premium.  I’d need to pay for a larger space if I was really going to keep my collection.

Extra closet space was practically non-existent, and I certainly didn’t have the space to display them properly.

That was the wakeup call for me.  Suddenly I had to justify the cost of storing all my comic books and cards.  So, I went online and checked out the current prices…

Ouch!  After 20-30 years of being stored away, the vast majority of the baseball cards were only worth pennies.  The comic books did a little better, with most of them seeing appreciation in the range of 15% – 50% (That’s total, not annual).  This means I effectively earned less than 1% annually on my initial investment.

Those are absolutely terrible returns.  After taking into account inflation, my real returns were negative.  In my disgust, I decided to sell off most of my collectibles the moment I realized what a horrific “investment” they turned out to be.

 

Collectibles As An Investment

So I think it’s pretty fair to say I’m a terrible investor when it comes to collectables.  That’s not to say that everyone is going to have as bad an experience as I did.  Some people actually do pretty well at it.

Maybe it was just my poor choice of things to collect, but according to available research on collectible returns, some collectibles are actually decent investments.  It totally depends upon the collectible of course — some people have done reasonably well investing in classic cars, fine art, ceramics, famous paintings, rare books and unusual coins.

You know — the kind of collectables that sell at a Sotheby’s auction.  Unfortunately, the vast majority of these items are well out of my price range (or my ability to adequately store them).

sotheby's auction
The collectables which have shown good historical rates of return are largely the domain of the rich and famous.  The sort of thing sold at a Sotheby’s auction.

This brings up the first major problem with “investing” in collectables:

Problem 1. Most collectables require special or costly storage to preserve the item.  Where I live, real estate is expensive and getting even more expensive every day.  In many cases, the cost to store and maintain collectables (even if it’s just a box in my house) is growing considerably faster than the value of the collectible itself.

Some collectibles even have more complex storage needs than plastic protectors and a cardboard box in the closet — some things need temperature and humidity control to preserve the item correctly.  Security could also be a factor .  You wouldn’t want your precious collectible stolen during a home break-in!

Anyway you box-it-up, storage is a big issue for collectible investments.

Problem 2.  Collectibles aren’t liquid.  Problem number two with collectibles is their the lack of liquidity.  If an investor needs to convert a collectible to cash quickly, he or she will probably not get top price.  It takes considerable time to find buyers willing to pay top price in the collectible market.  Stocks and bonds have the advantage in that they are liquid investments which can be converted to cash within a day, at very reasonable prices.

With collectables, it could take weeks or even months until a suitable buyer is found!

Problem 3.  Collectibles are speculation.  That’s right, speculation as in gambling.  Absolutely nobody knows today what a buyer will be willing to pay for a collectible 20 years from now.  The returns could be -5% annually or 20% annually.  It all depends on what a buyer is willing to pay.

Back when I was a kid, my definition of an investment wasn’t as well formed as it is today.  These days I require my investments to be assets, and I have a very strict definition of what makes an asset.

Uneducated investors might claim that investing in securities is no different than buying collectibles, but I know better now.  The value of an investment is the sum of future cash flows discounted back to their present value.

If that “investment” never creates any kind of cashflow, it’s just speculation.  NOT investing.

 

Lessons Learned

Ultimately I did lose some money on most of these early “investments”, but I don’t really feel bad about it.  It wasn’t a lot of money, probably only a few thousand dollars.  In return, I like to think I learned several valuable investing lessons from those mistakes.

Since those days, I’ve completely sworn off the purchasing of collectables.  Even movies!  These days if I want to read some comics, I simply reserve a graphic novel at the library.  In fact, the only thing I collect now is pictures of my kids.  They’re pretty much priceless, but only to Mrs. Tako and I!

Like most things that are collectible, value is primarily in the eye of the beholder… and Beholders are best avoided!

So here’s my sage advice on investing in collectibles — DON’T!

 

[Image Credit: Flickr1, Flickr2]

32 thoughts on “The Collectible Investment

  • August 29, 2018 at 6:15 AM
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    Ha! Exact same for me. I collected baseball cards, then comics. I have to admit I did dabble in collecting cards again right after college, but waned off it pretty quickly. Another admission in my head I convinced myself it was for investing, but I did derive a lot of joy from collecting. And I really believe it springboarded me into becoming stock picking and investing

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  • August 29, 2018 at 6:34 AM
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    I don’t really want to admit it, but for a short period of time I collected Starbucks gift cards. Unused with no money on them. For some reason I thought there would be interest in the different designs and images someday. There still sitting around the house somewhere, and I’m sure they’re worth nothing. Oh well…

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    • August 30, 2018 at 9:56 AM
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      What a fascinating thing to collect. You should frame them all and try to sell the collection on ebay!

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    • August 30, 2018 at 10:56 PM
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      Lol. I still collect Starbucks cards. Mostly I collect them from different cities when I or when friends travel and they are usually loaded with a small amount. I also take them when I see a cute design.

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  • August 29, 2018 at 6:48 AM
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    I’d add another caution when it comes to collectibles: They’re only worth what another person is willing to pay.

    I too was a comic book collector. (To a small extent, I still am.) Over the course of 40+ years, I built a nearly-complete collection of Silver and Bronze Age comics. That’s a lot of comics. If you were to go by price guides, my collection was worth more than what I paid for it (though not a lot more), somewhere in the neighborhood of $75,000. But the reality? My collection, once I pieced it out and sold it, yielded about $30,000. I lost big time. (I don’t mind, though. I got decades of enjoyment from those comics!)

    All of this is to say: Collectibles RARELY have any real value. Only the few prized objects in a particular universe — those special paintings, those important rookie cards, those key comic issues — are worth anything notable. Everything else is filler. This point is missed by many people.

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    • August 30, 2018 at 9:55 AM
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      Holy sh*t, JD Roth just commented on my blog! That’s like being noticed by god!

      Great advice btw JD. It reminded me of something Charlie Munger once said about Berkshire Hathaway — “The vast majority of our success happened because of only a handful of investments”. Or something pretty close to that.

      Echos of similarity in the darkness.

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  • August 29, 2018 at 7:15 AM
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    I’m guilty for storing some too. I guess it’s the nostalgia. But, yeah, pretty poor investment.

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    • August 30, 2018 at 9:58 AM
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      Yup. I’m no longer into collections or memorabilia. I don’t think I’m a very good minimalist though. 🙂

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  • August 29, 2018 at 9:03 AM
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    Just to emphasize your comment – for old comic book fans libraries tend to have large collections of graphic novels. I go on occasional binges and it’s very nice to not have to obsess about how pristine they are or feel dumb when they’re crap. Not a bad place to hang out either.

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    • August 30, 2018 at 9:59 AM
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      Yup yup! Tons of graphic novels at the library. It’s a way better way to feed that comic/manga habit!

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  • August 29, 2018 at 10:28 AM
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    I was a coin collector for many years. The most valuable piece in my collection, a 1798 penny is missing somewhere in my parent’s house or maybe got chucked by accident. It’s been missing for years so I’m not bothered about it.

    I am now a collector of fine companies- a collection worth keeping. To make it more tangible we could request for some stock certificates but these days that also incurs a hefty fee for asking.

    -Mike

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    • August 30, 2018 at 10:01 AM
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      I confess to liking the look of old stock certificates, but I don’t own any either. 🙂

      Bummer about your missing penny. This just kind of proves my point about the importance of storage for collectables!

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  • August 29, 2018 at 11:15 AM
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    All valid points about collectibles. Storage and security are a big one.

    It seems the only time collectibles are worth getting are the ultra rare, out of my price range type. Vintage cars, paintings by the masters, etc seem to always continue to skyrocket up when they come to auction for the very wealthy.

    Much harder to deal with the 2nd and lower tier of collectibles and frankly not worth the time if it is for investment purposes. If you get a joy in collecting them that’s fine, but really should not expect too much than that.

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    • August 30, 2018 at 10:04 AM
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      I think a lot of people start out collecting something because they love it — in my case it was the artwork in the comics. Somehow I convinced myself it was an “investment” in order to spend money on it further.

      I was wrong… so wrong.

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  • August 29, 2018 at 11:50 AM
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    I still have comics and cards at my parents house. I’m sure they are worth nothing.

    Some hold some sentimental value, but other wise they really are worth nothing, I think.

    Every collector knows the story of having Detective Comics #27. But it’s rare… precisely why it’s worth so much.

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    • August 30, 2018 at 10:06 AM
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      Yeah, most of the stuff people our age have was mass produced. There’s tons of it around and it’s not rare. Thus, it has little value.

      You never know though — one of those cards or comics at your parent’s house might be worth something! Worth checking at least. 😉

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  • August 29, 2018 at 4:03 PM
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    I still have my baseball card collection and have tried to sell it once or twice. I had some offers, but then they rescinded. Need to try again. I agree with you, it didn’t pan out but hey I was a kid… the good news is I can still recouping about five or six hundred dollars hours from them!

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    • August 30, 2018 at 10:07 AM
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      Wow, you must have had a pretty extensive collection for it to be worth $500 to $600! I didn’t get very much for mine, but then I was more of a comic collector anyway.

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  • August 29, 2018 at 4:28 PM
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    I purchased a lot of comic books from an auction last year, many first issues, thinking I’d land a couple of big winners – that was not the case.

    After looking online to see what they were worth (barely anything), and including the trouble of caring for them, storing them, cataloging and photographing them and then trying to find a place to sell them at, I concluded it just wasn’t worth it.

    It turned me off to the idea of reselling “collectibles” big time.

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    • August 30, 2018 at 10:12 AM
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      Couldn’t agree more Shawn! There might be a few people in the world that can buy at low prices and then resell again at higher prices, but I’m definitely not one of them. 🙂

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  • August 30, 2018 at 5:07 AM
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    I’m not really into collectibles either. They just take up too much space. Storage is a big issue. We have some artworks and I’m afraid they’re going to fade. The sun will damage paintings and all kinds of stuff (including comic books.) I agree that we’re not rich enough to invest in art. But, I don’t mind spending a little money on local artists. Maybe they’ll make it big someday and their work will be worth something. I think of it as spending, not investing. At least, I’m not fooling myself. 🙂

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    • August 30, 2018 at 10:13 AM
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      Good way to think about it Joe! At least with art it hangs on the walls and doesn’t take up too much space! 🙂

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    • August 30, 2018 at 11:41 AM
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      Supporting the arts is a noble cause too.

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  • August 30, 2018 at 9:39 AM
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    I used to collect basketball and baseball cards. I’m still holding out hope that my Shaquille O’Neal rookie card is worth something. I think I paid $10 for it when I was kid hoping it would be worth thousands many years later!

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    • August 30, 2018 at 10:14 AM
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      You never know… it might be worth $11 by now!

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  • August 30, 2018 at 1:09 PM
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    People have to stop using the excuse “they are a collectible”. “This RV is going to save me money on travel” as an excuse to have what they want. Just spend the money—-don’t try to justify it. I send those dreadful Bradford exchange and Thomas Kincaid ads to my daughter. It is our own private joke about the rediculousness of consumerism—the copy is outrageous in those ads.

    I could just cry over how my poor mother-in-law was ripped off by coin salesmen—total preditor. We sold her collection at a big lose and just had to move on. We never told the rest of the family, I wanted to let go of that sad story.

    My ex-sister-in-laws beanie baby obsession helped end her marriage.

    As far as I’m concerned collectible is code word for “ripping you off”

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  • August 30, 2018 at 1:22 PM
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    Your collectible investment strategy sounds a lot like mine… terrible.

    As we’re decluttering and selling off everything in anticipation of our big move, I’m now looking over all my collectibles and shaking my head. Comic books, baseball cards, Garbage Pail Kids cards, coins… not worth the time and effort to even try to get a decent penny on. I’ll probably sell off the few things individually that might be worth the time and then sell everything else off in bulk…. ugh.

    — Jim

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  • August 31, 2018 at 10:54 AM
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    It’s amazing how many people think their comic book collection will make them money. The big item in the circles I move in are Magic the Gathering cards. Other than a few rare cards they typically sell to consolidators for something along the lines of $1 per 1000 cards.

    It’s fine to collect things and have a passion for them but don’t do it to make money. Oh and don’t be mad if when you are older your kids do not want to inherit this huge useless (to them) collection!

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  • August 31, 2018 at 2:51 PM
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    I collected comic books and baseball cards as a kid.

    You are right – 99% of the time – collecting is a hobby which should be done for personal enjoyment, not to make money.

    Plus – usually the thing virtually NO ONE is collecting becomes the thing that would have been valuable to collect.

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  • September 3, 2018 at 8:51 AM
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    Oh man, I would be a horrible collectible investor. Considering how we went all nomadic and minimized everything we owe into 2 backpacks, I can’t stand the idea of keeping stuff around. Especially, as you mention, because of the cost of maintenance and insurance.

    I have a friend who collected art once. The insurance, framing, cost of delivering, packaging for moving (he had to move every year, etc added up to almost the cost of the art pieces themselves. Not fun.

    I’d much rather collect memories. Better for the environment and your sanity.

    Reply

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