Investing in Collections During Difficult Economic Times

What do you do when it seems like your investing basics are covered? Your stocks are strong and fairly stable, you are willing to hang on to your real estate properties until they plump back up, and you sock away your maximum into your retirement funds. Oddly enough, some banks are failing, gold has lost 25% since its high, the stock market is falling, and real estate has taken a terrible thumping. You would think that now is the time to buy real estate, but lenders aren't lending and you have enough gold and silver. Suddenly you find yourself wondering what you should do next with any extra money. Perhaps you should consider cherry picking the best collectibles to be in your portfolio.

To invest in any collection takes research and patience. But consider if you buy wisely and hold for the long term, your returns could be quite significant. Here are some basic rules for investing in any collectible.

1. Always buy from a reputable source. A private party might be selling, but you better be sure to check out their credentials. Many collectible items have papers of authenticity, and you should ask to see them before purchasing. If there is any doubt, such as whether a painting was done by a certain artist, don't be afraid to hire a professional to discern its authenticity. Collectible books, for example, should be looked over by an experienced bookseller. You might pay money for these services, but it would be better than buying worthless items.

2. Purchase items that are traditionally worth collecting. Gold and silver coins, for example, will always have some basic intrinsic value, as will paintings by famous artists. But beanie babies, magic cards, and even toys are only as good as the buyers' wallets. During difficult economic times, there are fewer buyers for those items that are of questionable value. These are not the ones you want as a portfolio enhancer.

3. Remember that dealers have to mark up the item in order to make a living. Here's a perfect example: a $1000 bill at Treasure Island in Fargo, North Dakota may cost a buyer $2800, but if you go to sell it at Rocky Mountain Coin, they will only give you $1100. The money in between helps the business owners stay in business, and you need them in business to help you invest in reputable coins and bills. This is where the private party seller can help you score a better deal, thus giving you a better return on your investment later. Just be sure you are almost an expert in what you are buying, or you may get scammed.

4. Be prepared for proper storage and insurance of your item. A rare baseball card is much easier to protect in a safety deposit box than on your fireplace mantle. The more people that know you have something of great value, the more chance is has to be stolen. If you are in this for prestige, you are buying collectibles for the wrong reason.

5. Educate yourself in what can harm your collectible. Take for example, famous documents. If they are not protected properly, you run the risk of them turning into scraps of junk. Understand how the climate in which you live can affect your precious investment and spend the money to protect it. This is not the time to see a baseball covered in mold, or a famous film cell ruined by time.

6. Your research should help you decide what will be a good entry and exit price. Don't let a salesman talk you into how much the value will double or triple by a certain date. If they do mention numbers like these, research it well. Ask them what they base those estimates on, and don't let them fool you.

7. Remember that values of collectibles can fluctuate at times. Consider the young man, for example, that approached an owner of a coin shop several years ago. He had found seven $10,000 bills in his grandfather's safety deposit box, and it was now his inheritance. "Are these real?" he asked the shop owner.
"Yes," said the owner. "And I'll give you $79,000 apiece for them." The coin dealer shook his head. "He refused, but I watched those bills quite a bit after that just in case he came back in again. For a long time they went up in price, then they dropped after a bunch of them were found in a bank vault in Las Vegas. Now they've drifted back up again."

Every once in a while, you will run across an article on collectibles advising you to buy "collectibles" you really like, so you can at least enjoy it if the value of it drops Ridiculous. You are not investing to play games. Your goal is to buy something that you can sell in a decade or so for double the money or more. Therefore, this is not time to gamble by purchasing antiques or knick-knack items that some salesperson calls a collectible. This is the time you spend money on those items that traditionally have fetched a high auction value. Otherwise, you are throwing your retirement into the hands of chance.
We've never had such an opportunity for buying collectibles as we have recently. Many investors have lost money in real estate ventures or even in the stock market and need simple cash to stay afloat. On top of that, there will always be divorces or estate sales that throw these kinds of collectibles into the wind for anyone to grab. By using the tips above, you can successfully round out your investments with purchases that may someday prove to be quite lucrative. Just be sure to take advantage of these opportunities, and go in armed with the knowledge you need to make a wise purchase.