25 Investments: Art and Collectibles

There are a number of unique benefits to investing in real assets such as art and collectibles.  This category can include nearly anything that is collected, such as jewelry, stamps, comic books, art baseball cards, or even automobiles. 

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 jewelry, stamps, coins, fine art or sports cards, but there really are no strict rules as to what is or is not a collectible.

Unfortunately, historical returns for collectibles are not widely available or known with much certainty.  They are generally thought to have lagged stock market returns, but have had periods of rapid appreciation due to either strong financial market performance or periods of popularity, which increases underlying demand and resulting prices.   

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, and real assets have a strong track record of performance in a highly inflationary environment.  

How to Buy or Sell It

Collectibles can be bought just about anywhere. More popular places are flea markets, antique stores, collectible retailers, auctions, garage sales, and more recently, online exchanges such as eBay. The value of the collectible can vary widely, but is dependent for the most part on supply and demand for the asset.

To read more on collectible investments, see Contemplating Collectible Investments.

Strengths

Many collectibles offer reasonable protection from inflation.

Diversification benefits to nearly every other type of investment.

Owning something tangible compares very favorable to most other intangible investments.

Weaknesses

Not at all liquid where buying and selling commissions from auction houses and galleries can run 20%, or higher.

Limited income producing capabilities while held.

Market values are limited and can be costly due to private appraisals required

Key Considerations

Liquidity:  Low

Historical Returns:  Medium, and Erratic

Inflation Protection:  High