How To Invest In Collectibles, Art, Wine, Shoes and More

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If you’ve invested in any of the more traditional assets over the past few years, such as the stock market or real estate, you’ve likely done quite well. However, you might be surprised to learn that even some more nontraditional assets have been skyrocketing as well. Collectibles, which include everything from art, wine and shoes to baseball cards and more, have reached all-time highs in many cases. But how exactly do you take the steps to join the collectibles market, and what are the benefits and risks? Here’s a quick overview of how the asset class operates and how to participate.

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How To Get Involved in the Collectibles Market

There are many ways to buy collectibles, from memorabilia dealers in malls to art galleries to third-party sellers on eBay. As with any investment, it pays to have some knowledge of what you’re going to invest in before you pull the trigger. This may be even more true when it comes to the collectibles market, where scarcity, condition and other factors come into play.

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For example, if you’re looking to invest in fine wine, it pays to have knowledge of what wines are in demand, which years are the premium choices and which ones are peaking in flavor. For rare coins, you should understand which coins command top valuations and why, and you should be especially familiar with how coins are graded — and how many dealers overstate the condition of a coin in an attempt to generate more profits.

If you’re not yet an expert yourself, there are a multitude of other ways that you can access the collectibles market. Some investors hire managers to curate their collectibles portfolios, much like traditional investors hire mutual fund managers. You can also join a group investing platform to buy or sell equity shares in a variety of collectibles. 

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Benefits of the Collectibles Market

One of the primary benefits of the collectibles market has nothing to do with how much money you can earn. Investors are often attracted to collectibles because they have an interest in specific items. For example, some collectors have been interested in the baseball card market since they were kids, and they buy cards both as an investment and as a joyful reminder of their youth. Others have become experts in fine wine, and collecting rare bottles gives them immense joy on top of potentially providing them with a healthy return. 

However, collectibles can also be a worthy investment class in and of themselves. For starters, the collectibles market can be a great diversification tool, as prices generally don’t move in tandem with other markets. There’s also the potential for great price appreciation. 

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Risks of the Collectibles Market

The primary risk of the collectibles market is that it is illiquid and hard to value. Unlike the stock market, where shares of liquid stocks can trade thousands of times in a single second, the collectibles market is much more opaque. Transactions occur much less frequently, and there’s often no intrinsic value to a collectible, making it hard to value. An original Monet painting, for example, may certainly be rare, beautiful and highly prized, but how do collectors place a dollar value on that? Supply and demand obviously play a role, but since collectibles, in general, are hard to value, their prices are generally volatile.

Another factor to consider is the cost involved in buying or selling certain collectibles. You can expect relatively significant markups from collectibles dealers, especially in the rare coin, baseball card and art industries. Selling a piece of art at auction, for example, may subject you to a whopping 30% commission, or perhaps even more. 

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Last updated: Oct. 18, 2021