INVESTING
Collecting for Fun and Profit
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Guarding Against Inflation in Your Portfolio
Collectibles really shouldn't be considered investments. No doubt you've read about soaring prices for various glassware, pottery, paintings and antiques. Perhaps you're amazed to see what some old toy or baseball card goes for. Or maybe your grandfather's coin or stamp collection brought such a tidy sum, you're convinced there's money to be made this way.
The truth is, there probably isn't. The real reason to pursue stamp, art or Depression glass collecting is because you love these things. It's possible they will retain some value, but don't count on it. There are several reasons for this:
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Predicting which collectibles will be worth a mint in 20 years is almost like predicting the weather 20 years hence.
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Collectibles aren't liquid. If you're forced to sell, you may have a hard time finding a buyer, and you might take a bath on the price.
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Transaction costs can be brutal. Remember, art galleries and auctioneers have to make a living, too.
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It costs money just to hold your collection. You may need to insure it and store it in some special way, and since it pays no dividends (except, one hopes, in fun), you have opportunity costs. After all, money spent on your collection isn't invested elsewhere.
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Unlike the stock of, say, IBM, for which there is a ready market with published bid and ask prices, collectible prices can be awfully squishy. What is the value of a pretty little watercolor by an unknown Florida artist? Who knows?
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Illustration by James O'Brien Copyright 1998 Microsoft Corporation