Pablo Solomon’s parents supplemented their income by buying, selling and trading collectibles found at yard and estate sales, and thrift stores, while living in some of Houston’s poorest neighborhoods.
Now he and his wife, Beverly, still enjoy trading collectibles and using them in their Texas design firm.
“My wife and I put money into art and collectibles and are now on the proverbial easy street,” he says.
Art and collectibles can be an interesting way for investors to diversify their portfolios. The U.S. rare coin market alone is worth $4 billion, according to the Professional Numismatists Guild.
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“The current low-interest rate environment makes a non-interest-bearing asset like art more attractive to own,” says Eric Smith, CEO and owner of Redwood Media Group, which produces seven fine art fairs across the United States. “The art market has become an island of stability and the global outlook for 2017 was positive as far as art buying is concerned.”
But many investment and collector professionals say unless you are an expert in your chosen item, it’s best to purchase items to enjoy, rather than to make a profit.
“Not all [collectibles] have gone up in value and some have gone down,” says Ilena Di Toro, owner of the collectibles website, JustMoviePosters.com, citing as an example Elvis memorabilia, which is on the decline because Elvis’ original fans are now in their 70s and 80s.
So before you rush to scout desirable paintings, coins, sculptures or the next hot collectible, heed the following expert advice.
Start small. Don’t go out and spend your life savings on one piece of art. “Pieces priced at or below $10,000 are increasingly popular this year, with many people looking to fill the walls of a newly bought property or as part of a renovation project,” Smith says.
And don’t be afraid to test your first investment in seemingly lowbrow places, rather than the hottest auction houses or retail locations.
“Nothing is cheaper than free. Do not be too proud to Dumpster dive, pick up stuff off the curb, etc. Learn to fix up, repair, paint — whatever to make throw away stuff more sellable,” Solomon says. “I have often taken stuff directly from picking it up off the curb on garbage day to wholesaling it to a dealer for hundreds of dollars in an hour.”
Determine an item’s value carefully. Each collectible — whether fine art, antiques, or other items — is its own animal that requires careful study and research.
“The value of collectibles has always been based on quality, rarity, condition, documentation, who owned or made the item, and the general appeal of the item,” Solomon says. When it comes to fine art, the artist is the most important consideration.
“Big-money collectors are in effect collecting autographs,” he says. “A signed scribble on a paper bag by Picasso will sell for more than the most beautiful painting by a local unknown artist.”
To get a feel for what is selling well, Solomon suggests talking to local pawn shop owners and studying real items in reputable shops, galleries, museums and collections. Because fakes are a concern, do not buy until you know it’s the real thing.
Also, look into collecting trends, which could have an effect on future value, including the impact of millennials.
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“Millennials are not collectors, not accumulators, and have no interest in mom and dad’s lifetime assortment,” says Mike Rivkin, owner of Antique Galleries of Palm Springs, California. “In particular, limited editions of almost anything and manufactured collectibles such as Franklin Mint items are virtually unsalable. Traditional categories like coins and stamps, toys, World War II items are similarly weak except for the very top end.”
By sticking with collectibles made of silver and gold, you may still be able to recoup some of your investment in the event the product value itself declines, says Jonathan Greenstein, owner of J. Greenstein and Co., whose house auction collectible menorahs go for up to $1 million each.
Buy it cheap. Auction prices are typically higher than you would net if you have to sell, Solomon says, so buying cheap is the key to making money at any time. But beware of prices that seems too good to be true, since no reputable dealer will sell something substantially under market value, says Barry Stuppler, president of the Professional Numismatists Guild.
Don’t expect to sell anytime soon. Unlike many stocks and bonds, art and collectibles are highly illiquid, says Robert R. Johnson, president and CEO of the American College of Financial Services in Bryn Mawr, Pennsylvania. You may not be able to sell them right away and when you do, there can be high transaction costs.
Because of this, “unless you are extremely well versed in a particular category or have some means of purchasing items below market, expenditures here should be viewed as decorative and not investment,” Rivkin says. “Ignoring all that, those willing to jump in should buy the best they can afford.”
Buy it because you love it and can afford it. Just like any investment, art and collectibles must usually be held a while to see a return, if at all.
“Ordinarily, investors in the space have been wealthy individuals, looking for long-term investments and committing to capital contributions, without annual returns for several years,” says Braden Perry, a litigation, regulatory and government investigations attorney at Kennyhertz Perry in Kansas City, Missouri.
“As much as I want people to buy my posters, I make no guarantees of future value and I stress that people should buy for enjoyment, not investment purposes,” Di Toro said. “Don’t expect to be able to sell your collection 10 years from now for millions or even hundreds of thousands of dollars, quit your job and retire to Florida. Instead, talk about your collectibles with loved ones and let them into your world for a while.”
That’s why you better love what you buy.
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“There’s no one style that outranks others,” Smith says. “People choose and develop their own personal taste while taking less notice or advice from the experts.”
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5 Tips for Collectible Investing originally appeared on usnews.com
