Advice from a financial planner
Making Money on Collectibles
by Rick Kahler
Almost everyone has a story about a cousin or an aunt who bought a box of junk at an auction and found in it a diamond ring worth several hundred dollars. Every once in a while a valuable painting by a famous artist turns up in someone's attic. Antiques Roadshow sometimes features odd items that have been sitting around in someone's house for years and that are appraised for thousands of dollars.
This doesn't mean buying and selling art or collectibles is a good way to make money. Buying art, antiques, or collectibles is extremely speculative, in part because values are so subjective. What a given item is worth depends entirely on what a collector might be willing to pay at any given time. A piece of pottery or jewelry might fluctuate considerably in value as trends come and go. Yesterday's hot collectible (think Beanie Babies or Jim Beam bottles) might be tomorrow's overpriced embarrassment.
Does this mean you should never buy art or antiques in hopes that they'll increase in value? Not necessarily. I am suggesting, though, that investment shouldn't be the primary reason for your purchase.
If you're going to collect Art Deco jewelry or decorate your home with original artwork, do so because you like those things. Choose a painting because you want it hanging on your wall. Buy a carving or a pot because you want it. Collect iron toys or old books because you have fun searching for them at antique stores and garage sales. If your art or collectibles increase in value, consider it a nice bonus.
If you're hanging onto a piece of art or an antique that you don't like because you think it's valuable and you think of it as an investment, why keep it? You could sell it and put the proceeds into your retirement portfolio. Then your investment wouldn't be taking up space in your house, and you wouldn't need to worry about maintaining it or insuring it. Another option would be to use the money to buy something you would enjoy owning.
If you do decide to sell an item, do some serious research and try to find out what it's really worth. Don't just stick a price on it for a garage sale or walk into an antiques store and take whatever they offer you. Get at least two or three estimates from dealers or other qualified experts. For something that's potentially quite valuable, paying for an appraisal might be money well spent.
Finding valuable collectibles at rummage-sale prices is almost always sheer luck. Anyone who consistently makes money buying and selling art or collectibles has invested the time and effort to become an expert. Unless you're willing to do the same (and you would enjoy it), don't try to fund your retirement this way.
In the interest of full disclosure, I should confess that not all of my own purchases turn out perfectly. One of my travel memories is of the time I bought two hand-woven carpets at bargain prices. What made the purchase memorable was the experience of stuffing the bulky rolled-up rugs into a taxi and hauling them to the airport, only to find that the baggage handlers had gone on strike.
Those carpets still decorate the floors in our house. Are they worth more than I paid for them? After all the effort it took to get them home, I certainly hope so. But I bought them because I liked them and wanted them in my home. If my primary goal had been investing, I would have put the purchase price into several well-diversified mutual funds instead.
Share your thoughts about this article with the editor.
Trending on TDS
- Tools for reaching your goals Slideshow
- Natural flea prevention
- Don't overspend on your wedding
- 8 ways to scam-proof your next vacation home rental
- Tips for profitable yard sale presentation
- What's on sale in March
- 5 types of freebies you can snag today
- What you shouldn't (and should) buy in March
- 5 dental scams that can put the bite on you
- Money-saving secrets of the rich and frugal
- 5 cheap -- or even free -- ways to exercise