My husband started buying Lord of the Rings action figures after the first movie came out, purchasing them a little at a time. He also has a box full of sports trading cards. A few of them are even worth something. We don’t exactly think of the action figures and sports cards as investments, but if we were in a pinch and needed the cash, we could sell them — and even possibly profit. Of course, the chance you take when investing in collectibles is that they may not be worth as much as you think they will be. In some cases, a collectible might decrease in value, depending on a number of factors.
Photo via Wikimedia Commons
What Makes a Collectible Valuable?
Part of the problem with using collectibles as investments is that the value is subjective. To some degree, all investments have subjective values, of course, but many other investments also have some sort of underlying revenue stream. Additionally, many other investments are more liquid. They can be converted to cash quicker and easier than trying to sell a collectible. If you are interested in collectibles, here are some things to think about in terms of what makes them valuable (this is also important to remember when investing in anything):
- What someone is willing to pay: One of the first issues is what someone is willing to pay. My husband had been following a particular Lord of the Rings gift set on eBay. It wasn’t selling. The seller kept re-listing it, only to have the auction expire without any bids. My husband emailed him and offered to purchase it at a price $15 lower than his initial listing. He resisted — until he failed his fourth auction. He listed it with a “Buy It Now” at the price my husband wanted to pay. Even though the seller thought his collectible was “worth” a certain amount of money, my husband disagreed, and the seller changed his perception of the value.
- Condition of the item: For collectibles to fetch maximum prices, or appreciate in value, they need to be kept in a mint condition. A baseball card that has folds and tears is worth much less than one that is in a brand new condition. When you buy collectibles, you should keep them in their original packaging if you expect to sell them later — and that packaging should be cared for. A smashed-in box will significantly lower the value of a collectible.
- Age of the item: In some cases, the age of the item comes into play. An older item might be considered more valuable than a newer item. A blunderbuss from the mid-18th century might be considered of higher value than one used during the Lewis and Clark expedition, a little more than 50 years later.
- Authenticity: This is especially important for collectibles related to arts, or to craftsmanship. An “authentic” piece will be valued astronomically higher than a copy, or something from the same period made by someone who wasn’t as recognized.
- Rarity of the item/demand for the item: And, of course, your item’s value will also depend on its rarity, as well as the demand for item. A rare bottle of wine, coveted by oenophiles everywhere, will be considered far more valuable than a more common vintage. The more difficult it is to find the item — especially to find it in good condition — the higher the value will be.
Buying and Selling
No matter the collectible, it is possible to find places to buy and sell. You can start on sites like eBay to get a feel for what’s out there, but if you are really serious about high end collectibles, you may need to frequent specific auctions and look for shops, experts and gatherings that specialize in the collectibles you are interested in. You can also look at yard sales, pawn shops and consignment shops. If you know what you are looking for, you might be able to find a real bargain when you buy from someone who doesn’t know what he or she has.
The key, of course, is knowing what to look for. Warren Buffett famously suggested that you shouldn’t invest in anything you don’t understand. This goes for collectibles as well. You should understand exactly what you are getting, and how it is likely to appreciate in value over time, before you buy.
Collectibles can be fun to acquire. However, you should be careful. You need to understand what makes them valuable, and accept that they could lose value if no one is willing to pay what you want.
Miranda is a professional personal finance journalist. She is a contributor for several personal finance web sites. Her work has been mentioned in and linked to from, USA Today, The Huffington Post, The San Francisco Chronicle, The New York Times, The Wall Street Journal, and other publications. She also has her own blog at Miranda Marquit.