Reasons Not to Purchase Collectibles as Investments

Most people have some sort of hobby or pastime that they enjoy working on, and these hobbies usually involve some sort of collectible item. These items range from baseball cards to old dolls and rare books, with everything in between. While it may be fun to collect these items, we are here to tell you why we believe they make terrible investments.

Now keep in mind that we are referring specifically to purchasing collectibles as investments. We are not saying that you shouldn't purchase these items for fun if you enjoy a particular field of interest, and we will have some brief advice at the end of this article for those who wish to become smarter collectors. Just don't deceive yourself into believing that your collectibles are guaranteed to go up in value in a few years.

1. Collectibles have huge markups. If you purchase an item from a respectable dealer, remember that this dealer is a businessman like any other and has to make a profit on the sale. The markup can often be 100% or more, and it gets even worse if you are dealing with some sort of middleman.

2. In addition to the possible markup, you may end up paying a number of other fees that you had not considered. For example, if you are purchasing an expensive item, you may wish to purchase insurance and storage in order to protect your investment in the item. You may also desire to have the item appraised (and this will probably be mandatory if you purchase insurance), and this will add to your overall costs.

3. There is always the possibility of forgeries. Unless you are an expert in a particular field like coin collecting, you could easily be fooled into purchasing a fake item.

4. Collectible items tend to break down over time by being exposed to the elements. Anything made from paper, for example, can be damaged by exposure to the sun, humidity, or insects. To make matters worse, this kind of damage will probably not be covered by your insurance plans.

5. Collectibles have a poor history of annual returns. If all of the above issues were not enough, you have to realize that these kinds of items have a poor track record. Most of the time, you are simply hoping that your collectible's value keeps up with inflation and that it does not fall out of favor with dealers and collectors throughout the country.

As you can see, collectibles do not make good investments in most cases. Huge success in this field seems to require clairvoyance on your part, since you have to guess which items are going to become extremely popular (like the cabbage patch dolls or pet rocks). You would have to become an expert in a particular type of item to have the best chance of success, but even if you spent years in acquiring this type of knowledge there would be no guarantee of significant profits.

If you wish to purchase collectibles, do so because you enjoy the subject matter, and if your item happens to go up significantly in value you can simply consider this a bonus. Try to buy from direct sources and avoid middlemen so you can lower your costs. Remember that you have to be willing to negotiate in order to get the best terms, and take advantage of resources for collectors such as the website www.kovels.com. Last but not least, be very cautious when talking to a dealer about the future value of an item. If the dealer is so sure that the item is a great investment, ask him if he will guarantee (in writing) to buy back the item from you within a determined period (like five years).

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