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Consider Collectibles In Your Portfolio

Original Article: https://money.usnews.com/investing/articles/2016-10-31/consider-collectibles-in-your-portfolio


Comic books, coins and baseball cards can outperform the financial markets.

"Rare, vintage collectibles by their very nature offer a level of security that is simply absent from traditional investment markets."


Remember Legos? Most U.S. adults do, but few people think about Legos as a collectible investment, capable of outperforming the stock market over a significant period of time.

Maybe those folks should piece things back together and think again.

A 2015 study by the The Telegraph in the U.K. concluded Legos are a "better investment" than stocks or gold over a 15-year-period. Vintage, pristine Lego sets returned 12 percent annually from 2000 to 2014, the Telegraph reports, compared to 4.1 percent return for stocks over the same time period.


Furthermore, recent Lego models are also popular, with newer sets reselling at a profit rate of 36 percent in 2014, the news organization reports.


Collectibles as diverse as classic cars, comic books, and coins are also popular items that passionate collectors buy and sell for profit, leading some to say collectibles deserve a place in Main Street Americans' investment portfolios.


Before going to the experts, let's include one key caveat – nobody is advising retirement savers to stack their portfolios with Batman comic books, but many money mavens say collectibles can add value to a retirement fund – and indulge your hobby passions.


"Rare, vintage collectibles by their very nature offer a level of security that is simply absent from traditional investment markets," says Chris Ivy, director of sports collectibles at Heritage Auctions in Dallas.


"In comparison, stocks, gold prices, and even real estate have proven susceptible to popping bubbles, but there is a finite population of Babe Ruth jerseys, Babe Ruth bats and Babe Ruth autographs," Ivy says.


"You'll find no purer example of the laws of supply and demand," Ivy adds. "The only sports collectibles to crash over the past two decades have related to modern players like Mark McGwire and Barry Bonds. If you bought $100,000 of quality, vintage pieces in 2000, then you're a millionaire today and the tide is still rising."


Reyne Hirsch, a Bellaire, Texas-based dealer in fine art, antiques and collectibles for 24 years and an expert on the "Antiques Roadshow" television show, says antique and collectibles traditionally have a better rate of return than the stock market.


"Depending on the type of items you buy, you can turn a profit quickly," she says. "Even hedge funds now have art investments in a move to diversify their portfolios."

Before you start mulling over a post-impressionist-era painting or even a 1999 Porsche 911 Turbo 996, the same vetting rules apply, Hirsch says.


"Buy only things in pristine condition and stay away from limited edition items, as they are usually, not really limited or even collecting worthy," she says. "Also, determine your investment budget beforehand and buy the rarest item in your area of interest."

Less is more when buying collectibles.


"Buying five lower-end items versus one higher-end item that values at the same price as the five is not a good idea," Hirsh says. "Common items go up in value much more slowly than more unusual, better quality items."


Also, research the item you are buying and stay disciplined, Hirsh adds.


"Follow the market," she says. "Much like the stock market, buy low, sell high. Certain times of the year are better to sell certain items than others."


Also, expect the unexpected with collectibles, which can come with costs you may not have plugged into the equation.


"An important tip to keep in mind is that at some point, collectible items will need to be authenticated," says David Almonte, a Providence, Rhode Island-based accountant who collects sports memorabilia as a hobby. "This process can take some time and may incur additional costs. Be sure to factor this into your investment when thinking about overall worth of an item or collection."


One last collectibles-as-an-investment tip – always be learning and discerning.


"In pricing collectibles, what counts are rarity, condition, eye appeal and popularity," says Beverly Solomon, creative director at Beverly Solomon Design near Austin, Texas. "While you make money in collectibles as in any investment by buying at a bargain and selling at market highs, the real beauty of collectibles like art, antiques, minerals, or other variations is that you can enjoy them as decor as you hold them for investments."

Solomon says in the 1970s, her artist husband, Pablo, approached major investment firms about forming an investment fund backed by art and collectibles.

"He was literally laughed out the door," she says. "Now some of these same items go for tens of thousands, if not millions of dollars. Luckily we followed our own advice and bought a lot of stuff. Now some of the investment firms have tanked and we are basically living the American Dream."


The key takeaway here? Sure, investing in dividend stocks is a proven way to build long-term wealth and security. But mix in a Dali print, a vintage Dare Devil comic book or even a Darth Vader Lego set for fun and potential portfolio profit.