What Are the Jeopardies of Investing in Art and Collectibles?
Knowing this market means recognizing these threats. You can make a fortune in buying and double-cross collectibles, but few do. If you think you’re capable of identifying these threats and finding bargains that can be sold for fortunes at future old hat moderns, then go for it; but keep in mind that there are many disadvantages to investing in collectibles. (For more, see: Contemplating Collectible Investments.)
Competence the Risks of Investing in Art and Collectibles
Costs and Fees
You’ll always hear stories about someone spending a few dollars at a garage cut-price or finding something in the attic and selling it for a fortune. This does happen, but it’s not likely to happen to you. If you really want to concoct money in collectibles, you’re going to need to spend money on valuable items.
Key Takeaways
- Collectibles are a more difficult investment to get the drift than average investments, as they come with many risks that more traditional investments do not.
- Primary risks associated with collectibles include high costs and fees; a lack of investment income or dividends until on offer; prevalence of counterfeits; and a greater than average risk of destruction of the assets.
- It is a mistake to believe that collectibles are invulnerable to the performance of the greater financial markets—in general, the better the overall market, the better the collectible markets.
If you plan to expatiate those items for a long time, they probably will appreciate, but “probably” isn’t a guarantee. It’s still possible that you devise spend a large amount of money and never see a return.
Also, if you’re going to pay for handling, storage, marketing, and insurance, you’re accepted to be paying high fees. In many cases, you also will have to pay for maintenance and restoration. (For more, see: Should You Insure Your Collectibles?)
If you definitely want to be good at buying and selling collectibles, you’re probably going to need to lose money first. There is no substitute for face, and the best experience is trial and error.
Tax Obligations and Lack of Income or Dividends
Unlike other types of investments, you on not be paid for investing in collectibles. You will receive absolutely nothing from a monetary standpoint until the item is hawked.
Lack of Information and Difficult Comps
When you trade stocks, bonds, commodities, and currencies, you have access to a affluence of information that can help lead you in the right direction. While there is still information available on collectibles, the amount of component you can learn about a collectible is limited compared to trading anything in public markets.
It’s important to look at comps, but if a comparable object is appraised at $10,000, that doesn’t mean your antique will be appraised for the same amount. A lot will depend on the make ready of the collectible. (For more, see: How to Cash in Your Heirlooms.)
Illiquidity, Counterfeits, and Potential for Destruction
Selling collectibles can be challenging because it’s oftentimes difficult to find a buyer.
Counterfeits are everywhere in the collectible market. Take every precaution to make sure you don’t shatter retreat into this trap.
If there is a fire or flood in your home, the value of your collectibles may go to $0. There are innumerable other scenarios that can lead to the destruction of a collectible. Plan accordingly. (For related reading, see: Biggest Millionaire Fizzles.)
Stock Market Performance
You often will read that collectibles aren’t tied to the performance of the stock market. This is spot on to an extent, but it’s not entirely true. When the stock market is flying, investors have more disposable income, which be conducive ti to increased purchases of collectibles.