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Collecting Can Be Wise Investing

by acenh (06/20/08).
Dollars & Sense

Over the years I have met many folks who collect antiques, fine art and collectibles. They talk about
their acquisitions enthusiastically and devote their free time to them. It’s obvious that they collect for
pleasure and curiosity – not because they are looking to make money.

Over time they make some wise and interesting choices, and then a funny thing happens. That stamp collection they’ve been expanding throughout their adult lives becomes very valuable.

How does collecting compare to conventional investments?

I consulted my business valuation library to determine return on the major investment vehicles. (These
returns are the average from 1926!)

The investment return list is divided into broad, traditional categories. In first place is small company stocks at 17.4%, followed by real estate investment trusts at 14.7% and large company stocks at
12.3%.

There second tier of investment vehicles shows a significant drop in return. Long-term corporate bonds
comes in a 6.2%, followed by long-term government bonds at 5.8% and U.S. treasury bills at 3.8%.

So how do these returns compare to your stamp collection?

Let’s assume you have purchased $500 in stamps each year for 30 years and the collection is worth $75,000.That is a 9% return. You have done something you enjoy for decades. Yet without really trying, you’ve achieved a return on investment that exceeds the performance of most professional money managers. Well done!

There are many examples like this in the collecting world. I do not know of any empirical data that tracks types of antiques and compares their sales data to cost data. That would be interesting.

The important point here is to collect what you enjoy. Just know that with a good choice or two, you might also be realizing some significant gains.

- Jim Sturgill is a director of WorthPoint and Founding Partner of Sturgill & Associates LLP, a DC and Baltimore area CPA firm.

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