Diversification is an important aspect of investing you should not ignore. This means you will want to invest in more than just growth stocks. It may be a good idea to invest in all types of stocks, bonds, and securities. Even real estate should be considered as an investment option. However, one often forgotten type of investment asset which can provide diversification is collectibles.
What are collectibles?
An item is considered a collectible if it becomes worth significantly more than when it was first purchased due to rarity or popularity. A collectible’s value will depend on its overall condition as well as the quantity of the same item still available. Some common types of collectibles are antiques, coins, fine art, toys, stamps, and comic books.
Condition of a collectible
How well a collectible is stored can play an important role in its future valuation. Collectibles can become quite valuable over the years if they are kept in excellent condition. However, these same items, if they have not been kept in good condition, are usually considered worthless.
Are collectibles a good investment?
Collectibles are not generally a stable investment and can come with a considerable amount of risk due to the volatility in valuations. It is difficult to determine what items will become valuable in the future and which ones will not. Therefore, the vast majority of items bought in hopes of them becoming collectibles end up worthless in the end. This is why it is not a good idea to make collectibles a significant portion of your investment portfolio, at least for most people. Definitely do not invest in collectibles as a retirement strategy.
Items still in production
You have to be especially careful with items which are still in production. Marketers may be purposely exaggerating when describing the item as a collectible simply to make profit. This is disingenuous since an item will usually not become a collectible until long after it has stopped being produced.
Also, even if an item becomes rare, pumping up the market value of the item, the producer of the item will take notice of this. Most will take advantage of this perceived market value by producing more of the item which increases supply. This results in a decrease in the value of the item. You would not want to be caught buying the item at the high of the market and then be stuck holding an item worth significantly less than you purchased it for.
Antiques
Although many people think of antiques and collectibles as basically the same, they are in fact two different types of items. People collect antiques simply due to the age of the items. However, you should realize collectibles do not have to be old in order to have significant value. In other words, all antiques are collectibles but not all collectibles are antiques.
Should you invest in collectibles?
Investing in collectibles probably should not be a large portion of your investment strategy. On the other hand, if you happen to be passionate about something it may bring you joy to collect a specific type of item. This is fine and can indeed result in you having some significantly valuable collectibles in the future. However, just be sure to stay within your budget and be consistent with your overall personal finance strategy.
The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and investors may incur a profit or a loss. Past performance does not guarantee future results.