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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