Common Cents # 10 Other Investments

 

Last week we talked about investing in the stock market using mutual funds and individual stocks. The problem with these kinds of investments is that they are usually not very much fun. It is far easier to get more excited about investing in baseball cards, vintage model trains, or classic cars.  If we employ good investment strategies, the hobbies or items we own that bring joy to our lives can also be part of our net worth and retirement calculations.

The secret to investing in collectibles is knowledge. It is very easy to get burned and very hard to find appreciating investments unless we are extremely knowledgeable about the subject. The big rule of thumb is that anything manufactured to be sold as a collectible isn’t. By that I mean that anything advertised as a collectible is almost never a good and appreciating investment. In my sixty years of observing such things I have seen dozens of items rise and fall because people thought they were an investment. I am talking about Beany Babies, Jim Beam Bottles, Cabbage Patch Kids, Avon Bottles, Commemorative Coins, Hallmark Christmas Ornaments, anything from the Franklin Mint. . .  you get the idea. If you really love owning those things, go right ahead and buy them; just remember that you are spending not investing.

I remember talking to a couple a few years ago who were very excited about adding an item to their collection that they had been looking for. It was a brand-new “collectible” in a retail store. When I commented that they were buying at retail prices and would someday be selling it at a wholesale price, they looked at me like I was nuts. They somehow thought that they could sell it next week for more than they paid though they had never tried to sell anything from their collection yet. That is not investing. That is speculation and seldom works out well.

If we watch the very popular American Pickers, Pawn Stars, or Antiques Roadshow, we learn that there are thousands of obscure items that are highly sought after by a small number of people. If we are one of them, and know exactly what we are doing, collecting and investing in antiques can be extremely rewarding and possibly lucrative in the long-term.

If there is one thing that we are passionate about, say for example electric guitars from the 1950’s or Tri-Five Chevrolets, we must learn everything there is to know before we buy, enjoy owning the item every day we have it and consider it part of our investment portfolio until the time is right to sell it. Someday we will pass the item on to another collector who may love it even more than we do. Selling our collection may be part of our retirement plan, but we cannot consider this to be the only investment made toward these long-term goals, just as we wouldn’t want to own stock in only one company. High-end collectibles are seldom liquid, and the values can vary in many ways. And of course, unless we are a dealer in the business, we are buying at retail and selling at wholesale.