From comic books to coins and memorabilia to NFTs, collecting things is a very popular pastime. In a poll conducted by The Royal Mint in 2019 it was estimated that more than half of all Britons include collecting as one of their hobbies. And why not? I hear you ask. Afterall, it’s fun, gives you something to do on the weekends, and it needn’t be expensive. In fact, it can be free if your passion is collecting something like fossils or train numbers.
But collecting can also be big business. Stamps for example, can sell for very high prices at auction. The most expensive stamp in the world is the British Guiana 1c Magenta which is worth an estimated $9.5million. And one of the newer entrants into the collecting market is NFTs (non-fungible tokens) with some selling for eye-watering amounts.
But are collectibles always a good investment?
What makes something ‘collectible’?
People collect for all sorts of reasons. They might be drawn to a particular series of china for example, or perhaps it’s a characteristic that they like such as buying things which all feature chickens or pigs in some way. People also collect because it’s linked to another of their hobbies, football match programmes for example, or sports cards.
Fan merchandise is a huge industry with collectors looking for things like sweatshirts and the latest team strip down to stationery and sports bottles. The global market for branded merchandise was estimated to be worth over $22billion in 2020. Items that do well on the resale market tend to be related to significant events or well-known players. Most, if not all, entertainment genres are adept at monetising the dedication of their fans by selling a range of items and licensing their brands. For some things there are strong secondary markets, meaning a canny collector can turn a profit if they buy the right things at the right time.
Time is a key element here. Something that is ten-a-penny today because everyone has it, might not be in ten, twenty-five or fifty years’ time. So it’s worth looking for things that are on sale today and considering the likelihood of how much they might be worth tomorrow. It’s unlikely that anyone who purchased a VHS copy of Ghostbusters back in the 1980s ever did so thinking it might be worth something one day. They might be pleasantly surprised to know a mint condition copy can fetch as much as £1800 nowadays.
The key rules for thinking about what might make a collection valuable are scarcity, and popularity.
What items are generally the most valuable?
Typically some of the most valuable items to collect are comics, books, coins, stamps, toys, branded merchandise such as Star Wars, memorabilia, medals and watches. The recent value of some sales of NFTs will probably put them in this list very soon too.
Like plastic figurines and even many coins, NFTs may have no significant intrinsic value, but the value is driven by popularity and the passion which drives collectors to want to buy and own things. Obviously this can ebb and flow over time as tastes or fashions change, so the key is to buy when the market is fairly cold and sell when the market is hot.
Pitfalls to watch out for
Like everything else in the world of alternative types of investing, the world of collectibles is riddled with the potential to make mistakes. Many are driven by nefarious behaviour on the part of those seeking to con you out of your money.
Mark-ups are common. It is difficult to know the real value of something particularly when it has no intrinsic value, so prices can be increased opportunistically. The harder it is to compare or research the value something might command, the harder it is to avoid potentially falling into the trap of paying more than something is worth. So always do as much homework as you can, and if you have any doubts seriously consider not buying.
Similarly, if something is known to be valuable then there will always be fraudsters out there who make and sell knock-off versions. And it is harder to spot this with some items because a lot of collectibles such as pop memorabilia, are not manufactured in a way that it can be easily verified. They don’t come with certificates or any kind of identification marks, so creating fakes can be relatively easy.
Another issue can be storage and insurance. If you’re going to start collecting something purely for its potential value you need to think carefully about how to protect it. Books are a great example of this. You can’t just put a valuable or potentially valuable first edition on your normal book shelves. Protection from loss and damage is key, so make sure you also check out your insurance coverage.
Don’t forget about the potential tax implication of buying and selling collectibles. In the UK tax payers pay capital gains on items sold for over £6000 based on the difference between paid for and sold for prices. Use the market value as your baseline if it was a gift, you sold it for less that it was worth, you inherited it (and you don’t know the inheritance tax value) or you owned it pre-April 1982. You can deduct costs including interest on a loan to buy the possession in the first place, or expenses type costs if you used your possession for a business.
And lastly you need to think about the fact that collectibles do not deliver any kind of annual yield or even a strong promise of future value. If you need to realise the value of your investment in a hurry its highly possible it will prove to be illiquid and even if you can sell it you might well not get the price you want for your collectibles.
What’s the upside?
Despite this there are huge upsides to getting involved in collecting, as long as you don’t necessarily focus on the potential financial gain.
Collecting can be fun, it can give you a sense of purpose and it can plug you into a community of people with similar interests.
eBay can be a great source of ideas and advice as well as acting as a market place for buying and selling. Check out this article and its forums where you engage with other enthusiasts to ask questions such as which are the best dealers to use and so on.
Plus Hoardr is a fantastic online resource helping collectors to identify fairs and events which take place all around the world, with focuses on various different categories of collectibles. It provides a list of dealers or specialists which is great to find out what is local to your own area, but also useful if you want to indulge your love of collecting when you are travelling around.