How To Invest in Collectibles

Masterworks
October 12, 2021

It’s a story we’ve all seen before: Someone stumbles into a fortune after discovering an antique item in the basement of their grandmother’s house. Or maybe it is the vintage record collection uncovered in an old barn. Whatever the case, these stories demonstrate the fact that collectibles hold value and very often can be of interest to investors.

But investing in collectibles comes with some unique challenges. What steps can you take to find the right collectibles to invest in? What’s the right price to pay? And when is the right time to sell? These questions are important for those interested in collectibles investment.

What are Collectibles?

Collectible investment involves purchasing a physical item that will (hopefully) increase in value and be worth more than its original sale price in the future. The item could be very rare or popular. Pricing depends on the uniqueness of the item and its condition. The collectible categories includes everything from baseball cards, to wine, rare books, home goods, autographs, coins, stamps, art and more.

It takes time to find and purchase collectibles. To keep the items in mint condition, the collector needs to also invest in the location and means of storage.

How to Invest in Collectibles

Investing in collectibles is a tried-and-true way to diversify an investment portfolio, adding a personal touch to more impersonal assets like stocks and bonds. That’s because the most successful collectible investors tend to focus on categories that they already know about or are related to their hobbies. Be it rare sneakers or art, understanding how things work in the market already makes the entire process of investment and analysis easier.

Think About the Long Haul: Collectible investing is rarely about quick turnaround times. It takes time for these investments to appreciate, whether it’s a new item that the investor will sell later as trends evolve or an older item that’s already worth something but could be worth more later on, smart investors choose collectible to purchase based on its potential values years after acquiring it.

Know Your Category: Collectors need information about available items and their originality. Get access to experts you respect and trust to give you reliable information on antiques you love. Find more quality sources that will pay off by discovering authentic and priceless items.

Exercise Caution: You might be excited about a particular item or type of collectible and end up overpaying. An emotional spending spree could lead to debt in a short period.

To succeed as an investor, you need to buy and sell collectibles at the right price.

There is some downside to investing in collectibles, however. These types of assets can be highly volatile, for one thing, making it easy to lose money if you’re not careful. Too often, just because a collectible has value to one person doesn’t mean that they’ll be able to sell it to someone else for that same price. That’s to say nothing about items that are marketed as “collectibles” (eg Beanie Babies) but are produced in such quantities that supply exceeds demand, thereby tanking their potential collectible value.

Why Invest in Collectibles?

At the end of the day, collectibles are fun. Most investors find collectible investment a hobby. The thought of choosing an item you love that will appreciate in good value is fun. Alternatively, it could be a family affair. Passing antique items down to the family could be your tradition that highly benefits one of your heirs.

It’s also a nice way to add some diversification to your portfolio. One common reason that investors look at collectibles is that, when the public market turns sour, your collectible items can serve as an isolated store of wealth. Swing in the stock market also often boost demand for collectibles among other investors looking for diversification.


Masterworks
Masterworks is a fintech company democratizing the art market. Our investors are able to fractionally invest in $1mn+ works of art by some of the world's most famous and sought-after artists.