How to invest in a booming collectibles market
With the explosion in popularity of non-fungible tokens, online investors and collectors have driven up the prices of all kinds of digital collectibles, from basketball cards and rock designs to virtual racehorses.
But many traditional items that people love to collect are also seeing an increase in popularity.
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“In early 2020, there was a slowdown in auctions and exhibitions,” says Laura Doyle, head of art, jewelry and valuable collections at insurer Chubb. “Then, as people spent more time indoors, they had more time to devote to their passions, including collecting.”
As a result, she says, “we’ve seen record prices in virtually every category.”
With the rise in prices, many investors are seeing collectibles as an investment opportunity. Nearly half of Americans (47%) say they would buy jewelry as an investment if they had the money to do so, according to one recent Chubb poll. About 40% said they would do the same with art, and about a third of respondents said they would add wine to their wallet if they could.
Read on to find out how the experts say you can strategically start a collection while maximizing your chances of your valuables appreciating over time.
If you’re hoping to eventually make a profit on your collection, you’ll need in-depth knowledge of the area you’re collecting in, says Xiliary Twil, senior accredited fine arts appraiser with the American Society of Appraisers. “The goal is to learn as much as possible and to be an informed collector,” she says. “That’s the key to everything. You wouldn’t want to go out and buy stocks without doing your research. “
In the fine art world, that means following all the free literature you can get your hands on to get a feel for the art and artists that are trending among collectors, Twil says. “All the big galleries have mailing lists and some offer virtual tours,” she says. “Auction houses like Sotheby’s, Christie’s and Phillips have very good writers who publish articles on recent trends and market research.”
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If you don’t know where to start, experts recommend contacting an auction house or consulting firm that specializes in the product you want to start collecting. “You want to go to reputable people who will give you advice. Ultimately their goal may be to sell you something, but they are going to give you the confidence and knowledge to feel good about what you are buying,” explains Irv Goldman. , CEO of Acker Wines auction house.
“You don’t want to just read something online and say to yourself, ‘That sounds good,'” he adds. “Go into a business that tries to get people to invest in wine and choose their brains. Ask them how they choose wine and what their process is. Like anything else, you have to do your homework.”
Depending on what you collect and how you collect, you may be able to get a good return on your investment. According to Acker data, a fine and rare wine index has generated a cumulative return of 242% since the start of 2006. This is less than the 300% return of the S&P 500, but a respectable figure associated with a fraction. the volatility of the stock. market during the same period, according to Goldman.
Any collector’s item you buy has a chance of generating a much more dramatic return, both ways. “Designer sneakers are currently a $ 79 billion market that is expected to grow to $ 120 billion by 2026,” Twil says. So it’s not hard for a collector to imagine that the right pair of shoes could make their wallet skyrocket. But things can also go the other way.
“No matter what type of furniture you collect, it will end up being old-fashioned,” Twil says. “We all thought the shoulder pads, spiky hair, off the shoulder tees and leggings were the most amazing look of the ’80s. They didn’t stay.”
To give yourself the best chance of making a profit, try setting up a diverse collection of the article you have chosen that covers different areas of the market that interest you. This way, according to experts, the value of your collection will not collapse along with a drop in a particular coin. “For an entry-level wine investor, you are considering $ 100 to $ 150 a bottle,” Goldman explains. “If you can start by spreading your first investment over, say, six different regions, you’re fine.”
Even if you do your research and spread your bets, there’s no guarantee that your interests will be aligned with those of the market, says Doyle. So “buy what you like,” she says. “Because you never know what’s going to happen. There are no guaranteed returns.”
It is essential that you protect your collection from damage and theft. This process begins even before the purchase, says Doyle. “Consider who you are buying from,” she says. “More and more collectors are buying directly through online platforms like Instagram, with items being shipped directly to individuals. It may cause damage problem during transportation.
Once you’ve started a collection, the best thing you can do to make sure it doesn’t lose value is to manage its physical upkeep, Doyle adds. “Whether you buy out of passion or as an investment, prioritize physical and financial protection,” she says. “It means evaluation, Assurance, and proper storage. “
This process should last throughout your ownership of your collection, says Twil. “You should have assessments done every 3 to 5 years, because the assessments change,” she says. “If your things are worth more and your insurance rates go up, you better be safe than have a flood and watch your art float out the door.”