WSJ Experts Weigh in on Whether Investing in Collectibles is a ‘Recipe for Disaster’

Roy Lichtenstein’s Pop Art masterpiece “Ohhh…Alright…” sold for $42.6 million in Christie’s Evening Sale of Post-War and Contemporary Art on Nov.10, 2010, setting a new world record auction price for the artist. This was a good investment.

The Wall Street Journal posted an article online on Feb. 28 with the headline “The Experts: Is Investing in Collectibles a Recipe for Disaster?” In it, several investment professionals were asked to weigh in on the following question: “Are collectible objects a bad investment?”

The answers—based on their experience in investing—are not surprising.

Tom Brakke, a consultant, writer and investment adviser, writes: “Chasing a hot trend in collectibles is generally not a good idea. As with developments in the financial markets, it’s possible that a trend will persist and that you’ll make some money, but selling at the right time is a real trick.”

Another of the experts, Charles Rotblut—the vice president with the American Association of Individual Investors—wrote: “Investing in collectibles can be classified as an oxymoron—like government budget. There are many people who are collectors and investors, but very few can legitimately say they make money investing in collectibles.”

The main point, they all seem to say, is that if you don’t do your homework, follow current trends, learn how the collectibles markets actually work and devise a detailed strategy, then, yes, investing in collectibles is a recipe for disaster.

And, as WorthPoint subscribers would probably add, “Well, duh yeah!”

If you don’t know what you are doing, investing in collectibles is just as risky as picking a stock because the company’s three-letter ticker abbreviation and your initials are the same.

It’s clearly not a disaster for WorthPoint members and is why more than 200,000 people come to WorthPoint every day. Whether they intend to buy an item as an investment or simply because they receive enjoyment from the item, they are educating themselves about the item, what it was worth a few years ago, what it is worth now and what it might be worth in the future, should all the stars align.

One of these experts pointed to the History Channel’s television program “American Pickers” to study as a possible investment strategy:

“Watching the show, you’ll notice the Pickers do two things regularly as they interact with the average—yet often very serious—collector. First the Pickers are usually buying collectibles from the amateur at 20% to 50% of their actual retail value, a ratio that is heavily in favor of the Pickers. Why? The Pickers have access to more efficient markets, like their store and existing collectible-geared clients.

“Second, notice that amateur collectors on the show usually end up with the majority of their collectibles being worthless. Viewers of the show routinely see collectors with hundreds, if not thousands, of collectibles and only a few items are purchased by the keen Pickers. Why is this? The answer is that collecting the “right” item is difficult and akin to sifting through a creek bed for a nugget of gold. The hard-to-come-by combination of selection skill, restraint and even luck as a collector is illustrated in most episodes of the show as the Pickers search for “needles in the haystack.”

Superman still holds the title of the most expensive comic ever sold after an Action Comics #1 in CGC 9.0 condition sold for $2,161,000 in December of 2011 at a Comic Connect.com auction.

The problem with this advice is that 1) most people don’t have a store and/or collectible-geared clients to leverage and 2) most of the time, the values quoted on the show are “enthusiastic,” to say the least. Those guys can say that an item picked for $100 can be sold for $300. Usually, a quick search through the Worthopedia will show that recently realized prices for a similar item is not in that $300 range. If they know someone who will buy that piece for 300 bucks, good for them. But if you or I were to buy that same item for $100 without doing the research, odds are that we’d be hard-pressed to get back out investment when we do sell it.

The impetus for this article seems to be two recent WSJ pieces on the skyrocketing values of some comic books and big financial hits some investors take when investing in fine art. I guess if you have large sums of money to invest, being wrong will cost large sums of money.

What do you think? Is this just common sense, or do people really have to be told that knowledge, research and critical thinking are important when considering an investment, whether it’s a copy of Action Comics #1, a small Picasso or 100 shares of GLW? Leave your thoughts in the comments section below.

Gregory Watkins is the editor of WorthPoint.

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6 Comments

  1. Shawn Surmick says:

    Investing in collectibles should only be done by this who have a full understanding of the market, a well written plan, and a defined exit strategy documenting how one plans to sell or properly ‘will’ the collection to their heirs. Unfortunately in today’s market, speculation on newer items is all the rage. if speculators of Magic the Gathering cards, Lego sets, and video games; would only take the time to do their research on other items that have a much better track record, losses could be minimized. I am wondering how society is going to deal with the collectors of my era (Generation X’ers and below) who chose to put their net worth in everything from Beanie Babies to Lego sets to Halo as opposed to rare coins, investment grade antique glass, and historical items. The easiest way to obtain wealth in any capitalistic society is to invest in what you know. Collecting out of passion does not mix well with logic. This is why having a written plan and studying the market is a must. Sad to say, but current generations think that positive price trends will always continue not understanding that there is a reason that over the last few years the bronze age comic book market (i.e. The 1970’s) lost over 30% across the board, while rare comic books like Action Comics #1 soared to over one million dollars in value.

  2. Eric Miller says:

    This article may give the mistaken impression that it’s too hard to buy the curated second-hand goods they like. Phooey. The industry needs to show people that its good to buy vintage vs new. No, you may not make money or even get back 100 percent of your purchase price. But if you buy a new item used for the same purpose, you probably would only be able to get back 10-25 percent of the purchase price. Plus the “collectible” – better to say cool and usable- item is a lot more interesting and fun to get than the one everyone else has. Sure, if you get really good, you can buy the stuff and make some money. But living with antiques is the fun part. Having the stuff around is the fun part. Having stuff that’s an expression of what you are all about is the fun part. Making money is good to, but its not the why of it all!!!

    • Liz Whitlock says:

      I agree 100%! I buy functional and beautiful second-hand items that are better made and more beautiful than the new plastic crap available in stores today. Every time I buy something second-hand, something is kept out of a landfill–a worthy goal in and of itself. Often items I buy are repairable–imagine that! I research what I buy and learn that in the CURRENT market–usually eBay–the same item sells for several times what I paid. But more important, I learn history that starts many a conversation. I rarely buy any brand-new non-consumable items in stores any more, and my life is richer for it.

  3. Nicholas says:

    It’s a really bad article and I’m surprised the WSJ would publish something so one sided, all the “experts” make a living from selling financial investments and none appear to have any professional knowledge of the art, antiques and collectible markets. So they all say financial investments are better for various reasons, have any of them ever tried to invest in collectibles?

    The only point I would agree with is that investing in objects can mean your asset as less liquid, so you can’t access your capital as easily as with stocks for example, but there are many financial investments that have similar inflexibility, you are tied in to a minimum term e.t.c.
    To offer a counter example just look at the market for high end classic cars, at the end of 2011 the Financial Times did a feature article showing how they had risen in value more than the price of gold that year.

    There are also funds available where you can invest your money and the fund buys art/collectibles with the collective money. Stores those objects securely and sells it on. A way of pooling the risk inherent in buying anything and getting experts to decide on what is the best investment, in any given field.

  4. Larry Quirk says:

    It is always a toss up as to whether there will be enough buyers in the future (10/20 years?) with enough excess money to spend that will want the collectible that you might buy in bulk today. So first find items that you want to collect and then enjoy owning them and become very familiar with that collectible area. That knowledge will give you a leg up so that you will be able to buy low when the opportunity presents itself and more accuratly guage the market as time goes on. Just buying loads of item X and storing it in the garage on the idea that they will all become valuable someday is truly a recipe for disaster.

  5. Patricia Z Strunk says:

    I can understand the articule,if you buy something just to gain money selling it later..thats not a good idea,specially bcs when you need the money you end out selling itmfor less,you pay for …necesity is the mother of all the bad deal!!..I dont do that,if Im buy a item is first because I love it! I can live and use it and enjoyed! Then if I do sell it is on the right time……for the right price.