Some Advice for Investing in Collectibles

Right now, I have a collection of sports cards and other trading cards that is easily valued at $10,000 – and, depending on how sales went, it could add up to as much as $20,000. In fact, if I had not sold off a large number of my cards when we were first in financial trouble, my collection would be worth $30,000 to $40,000.

Over the years, I’ve learned what works and what doesn’t work when it comes to buying and investing in collectibles. Here’s a summary of what I’ve learned that’s worked well for me in the past.

Invest only in collectibles for which you know the market well. Let’s say you walk into a store or a booth that deals in the kinds of collectibles you’re interested in investing in. If that dealer removed the prices from everything they were selling, could you come close to naming the price for most of what was on offer there? If you can’t do that, you shouldn’t be investing in the collectibles over the long term.

In my experience, I’ve found that such a base of knowledge is almost always borne out of a hobby. It is extremely difficult to successfully invest money in collectibles if you don’t have a healthy knowledge of that particular type of collectible.

Stay on top of any collectibles market you’re invested in. Over the years, my interests have changed. I used to be passionate about baseball cards, but now the only ones that deeply interest me are pre World War II baseball cards. Thus, I’ve sold off almost everything I had that was made after World War II. If I can tell my interest is waning, then that means I’m not going to be able to adequately stay on top of the prices of items in that market and I might not be aware of an oncoming drop in prices.

If you’re not interested enough in the hobby to spend some time each week – or at the very least each month – to keep up with the changes in that hobby, it’s not a good idea to invest in that hobby. It’s no different than investing in individual stocks – if you’re not keeping up with that company, then you’re making a mistake investing in that company’s stock.

Let bargain hunting be your primary method of acquiring new items. Generally, buying from dealers is a poor place to invest your money. It’s a great way to fill in a hole in a collection (I used a dealer to complete my 1965 Topps set many years ago), but the prices they have on items are generally not going to be bargains.

Instead, you should look for non-typical places to fill out your collection. For the things I collect – vintage video games and board games along with trading cards – I hit a lot of Goodwill and secondhand stores along with yard sales. I found a board game that’s worth $100 on sale for $3 once, and I’ve found many lots of trading cards where one single card in the lot is worth more than the entire package.

I have found collectibles of types I don’t invest in that I know to be valuable when bargain hunting. In those cases, I’ve simply bought the item and resold it as quickly as possible.

Keep the most valuable items secure. My most valuable collectible cards currently reside in a very secure place where they’re not going to get handled and the risk of thievery is extremely low.

The best option for most people is a safe deposit box at a local bank. I have two friends that have home vaults in their basement that are part of the foundation, but I don’t plan on doing that in our new home (it seems a bit extreme to me).

Have the most valuable items professionally graded, if available. Professional grading means that you have an independent company assess the authenticity and condition of your item. They will also often seal the item so that the condition can’t be altered.

Grading can’t decrease the value of your item, but it certainly can increase the value of the item. For me, the cost of professional grading is worthwhile for any item that has a value of $500 or more. For items of lesser value, the cost of grading ends up being a significant part of the value of the item and thus it would take a pretty large price bump to make up for that value.

The thing to remember is that you can always discard the professional grading if there’s a reason to do so in the future, restoring the grading to pre-grading shape. I have never done this, but knowing that this option was available to me helped me with the initial decision to have some of my items graded.

Don’t have all of your money in collectibles; diversity is king. It doesn’t make sense to have all of your money in stocks. It doesn’t make sense to have all of your money in cash. It doesn’t make sense to have all of your money in real estate. It also doesn’t make sense to have all of your money in collectibles. Diversity is king.

I would be very nervous if more than 15% of the total value of my assets was in collectibles. If I found myself in that situation, I would diversify this by selling off some of the collectibles and investing the money elsewhere.

You do not want a collapse of the collectible market to leave you broke. Like it or not, collectibles are non-essential items and buyers can be fickle. If interests were to change, your collection could devalue relatively quickly and that’s not something you want to be exposed to.

Having said all of this, I have deeply enjoyed investing in collectibles and, thanks mostly to being patient and looking in a lot of thrift stores and yard sales, my collection is worth substantially more than I put into it.

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