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Collectibles or Collectables
Investing in Collectibles or
Collectables and Art can be both personally and financially
rewarding.
Generally speaking, a
collectible is any physical asset that appreciates in value
over time because it is rare or it is desired by many. Many
people think of collectibles as things like stamps, coins,
fine art or sports cards, but there really are no strict
rules as to what is or is not a collectible.
Objectives and Risks
The objectives behind investing in collectibles vary
depending on the person and the collectible. Collectibles
can take very long to increase in value, and they offer no
assurances as to their value in the future. Furthermore,
unlike other investments, collectibles offer no income. The
one advantage is that most collectibles increase in value
along with inflation.
How to Buy or Sell
Collectibles can be bought just about anywhere. More popular
places are flea markets, antique stores, collectible
retailers, auctions, garage sales, and more recently, and online
exchanges.
The value of the collectible
can vary widely, but is dependent for the most part on
supply and demand for the asset.
Collectibles and Art
investment is similar to investing in anything else. You
want to buy at a price lower than the price you sell it. For
most people this is not the primary reason for purchasing a
nice piece of artwork, but if you ever change your opinion
about that piece you bought, want something new, or simply
need a couple extra bucks, selling your investment could be
an alternative.
Art and Collectibles trading is subject to the same market
pressures as other mediums of investment, but there are some
big differences. Subjective factors play a key role in the
price. These factors includes condition, authenticity, the
visual appeal of the work, and even the people who owned the
painting prior to you.
But the best kind of investment is one you want to own. You
will know more about it, enjoy having it, and are probably
more likely to sell it for a higher price upon sale date.
Real life Examples
Picasso's "Boy with a Pipe" sold in 1950 for $30,000 and
again in 2004 for $104 million.
"A Bold Bluff", one of two Cassius Marcellus Coolidge's
"Dogs Playing Poker" paintings was painted in 1903 and was
auctioned off in early 2005 at Doyle New York's annual Dogs
in Art auction. Before the auction the senior vice president
of Doyle estimated the value of the painting at $30-$50k.
The winning bid was $590,400.
The Mei Moses Fine Art Index, put together by the two
economists at NYU, shows the paintings in their index
outperformed stocks and bonds over the last 130 years.
Collectibles can include art,
antiques, old coins, vintage cars, stamps, rare books,
Persian rugs, baseball cards, bottles of fine wine and other
items that offer the potential for appreciation in value.
Unlike other investment vehicles, these items generally do
not generate any type of cash flow during the time that
they're owned (unless the property is so rare and exquisite
that you can open a museum and charge admission for patrons
to view it). In addition, a number of other characteristics
make collectibles investing significantly different from
investing in financial securities.
First, specialized
knowledge is necessary in order to be able to determine the
value of a specific collectible, whether it's a work of fine
art, a rare book, or a vintage car. It can be quite easy to
pay too much for a collectible if you don't have the
expertise and familiarity required to judge the particular
item. You should therefore be knowledgeable about the
factors that determine the value of the specific Collectible
or work of Art.
Furthermore, the markets for collectibles are informal as
well as unregulated. When buying or selling a collectible
item, it's important to have an idea of the worth of the
item because you're dealing with individual buyers or
sellers. There are no current price lists as there are with
stocks and
other financial instruments. Similarly, there is no
governmental body such as the Securities and Exchange
Commission (SEC) that regulates companies who list their
securities on the financial markets. You can easily pay too
much or sell your collectible for far too little without
being able to seek any recourse from an official regulator.
Additionally, many collectibles are bought and sold at
auctions, where prices can vary greatly.
Supply and demand generally determines the value for
Collectibles and Art. For example, the supply of paintings
of those artists who are considered to be the truly great
masters
is limited; it can, therefore, require huge sums of money to
invest in these items. Think about it: what actually makes a
work of art by da Vinci, van Gogh, Picasso, or Salvador Dali
worth two million, twenty million, or a hundred million
dollars? It's the fact that they are others who are willing
to pay those prices to acquire such works. By comparison,
the works of unknown artists are much more available, thus
they're bought and sold and far lower price levels.
Investing in collectibles will also likely not bring
particularly fast profits. As stated previously, there's no
underlying cash stream upon which to base the item's value
or return-on-investment. Returns are only realized when
collectibles appreciate in value and are sold at a higher
price than that at which they were purchased. This desired
increase can often take a number of years – at the very
least – to materialize.
Finally, collectibles must be characterized as illiquid
assets because they are not easily converted into cash. Added
are the high transaction costs associated with liquidation
of these items. Regardless, investing in collectibles
provides a definite sense of pleasure and enjoyment for many
individuals. If collectibles are of interest to you, there
is any number of easily accessible books, magazines, and
websites to provide you with specific information on the
many different types of potential investments available. As
with any investment, however, proceed with knowledge and
prudence. |
