Collectables as Tangible Investments
However, when you look at collectables as tangible investments, the trick is to judge the items that will hold their real value and, hopefully, become more valuable over time. This means avoiding fads and fashions which can die as quickly as they blossom and buying carefully as taking bad value at the outset means your investment has an uphill climb all the way.
Obviously a tangible collection of items like stamps, postal history, medals or coins will still experience fluctuations in their value based on supply and demand at any given time. Invariably these type of investments are protected by little more than the good judgement of the investor as they are unregulated compared to traditional financial products. But if well bought and cared for, collections can hold the real value of your wealth while it is invested over a period of years and also provide capital appreciation in real terms once realised by disposal.
It has to be understood at the start that buying a collection as an investment is almost certainly not suitable for short term gain. It takes time for factors like rarity and demand to impact positively on value and purge the negative impact of management and trading costs. These costs can include the security of your collection - which may involve insurance costs - or auctioneer's fees that might need to be paid when the time comes for disposal. Investing in collectables like stamps and coins is a long term committment and shouldn't be considered unless you are happy to tie capital up for many years or risk a loss if you sell up sooner.
On the plus side, tangible assets like stamp or coin collections are highly mobile and tend to be easier to value than intangible assets, such as a website or copyright, because they are more readily traded publicly at current "market value".
Before you commit any money to purchase a collection be sure to know the difference between investment and speculation. When you invest in a stamp collection you should be prepared to buy something of already proven rarity and value. Think of it as a lump of gold that you can, according to purity and weight, determine current value easily by what the market is paying. The plan is to buy something that, because rarity is already established, will hold its value and have confidence it will also increase over time despite any short duration fluctuations.
When you speculate you are buying something because you feel it is cheap enough now to take a chance on the potential you think it has to grow in value faster than future inflation and trading costs to realise a profit. To put this in the context of collectables, you might speculate that a new stamp issue currently available in Post Offices at face value will quickly prove scarce enough for the forces of supply and demand to drive up the price collectors are willing to pay and what a website like eBay may charge you to sell them. It's a gamble but it's a gamble I know many stamp dealers take regularly and use their expert knowledge to do very nicely from!
Other examples of investment Vs speculation might include speculating in works of art from new artists or investing in a group of medals including a Victoria Cross. You might buy some proof coins featuring a special commemorative design speculating that future demand will drive up their value or you may choose to invest in a British penny dated 1933.
There is one more thing you need to consider before buying a collection of items as an investment and that is income. Do you need your wealth to generate income? If you do then buying stamps or coins is probably not for you. Unlike property which can be tenanted or buying shares in a company that pays out a regular dividend, a collection wont generate any income. It's all about maintaining the real value of your wealth while it's invested and hopefully making a profit in the future (or perhaps your children's future) when the collection is disposed of.
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