Collectibles may include anything from diamonds to stamps, currency or coins to cut crystal, paintings, and many more categories. Stories appear regularly about the appreciation of diamonds, coins, and paintings -- or, more recently, about their price decline in the last half year or so.
Over the longer run, some collectibles have outpaced inflation. It could be that they will again in the future. Generally, collectibles offer an opportunity for the knowledgeable investor-collector to develop a store of value with a portion of his or her funds. Although collectibles offer some advantages , you should approach them cautiously and consider the following:
* Any serious collector should develop enough expertise to avoid having to depend entirely on a dealer. If you are into stamps, you should know enough about stamps to recognize value and understand how and where stamp collections may be bought, sold, or traded.
Developing one's own expertise in a category of collectibles can be a rewarding dividend in itself. Paintings or prints, for example, can be exhibited and enjoyed while they appreciate.
One woman I know became so fascinated with cut crystal that she dug into old books, visited other collectors, photographed museum pieces, and explored for valuable pieces in antique stores with her accumulated knowledge to build her valuable collection worth many times its cost. Knowing where to look and being able to recognize good pieces were advantages she used shrewdly. She became such an expert that auctioneers and other collectors called her for advice. Her hobby turned into an absorbing pastime and a wealth-building treasury of fine pieces.
* Recognize the disorderliness of the market. With collectibles so varied, there is nothing like the secondary market for buying and selling issued stocks. Auctions, antique stores, and publications attempt to serve both buyers and sellers. Specialists handle diamonds, coins, currency, and stamps, but there is little standardization and no authority supervising the market in the same way the Securities and Exchange Commission supervises the stock and bond markets.
* Collectibles tend to be unique because their individuality adds to their value. But, since each item is nonstandard, its value must be judged subjectively. an ounce of gold is an ounce of gold to any precise measurer. But a diamond differs from other diamonds in weight, color, clarity, and shape, with the absence or number of flaws subject to opinion. Even stamps, currency, and coins that were originally the same may be subject to differences of condition. So valuing collectibles is an inexact science -- another reason for knowing as much as possible about the field of your interest.
* The difference between bid and asked prices can be as much as 100 percent, with the asked price double the bid. Stocks may be traded with as little as a 0 .5 percent difference between bid and asked prices -- possibly less. An antique appraised at $1,000 may be sold at $1,000, but the owner after commissions and expenses may net only $500 to $600 -- possibly less.
* Collecting requires far more experience and know-how than almost any other investment. If you have something of value, possibly an heirloom or something you bought, take care. Before selling, ask at least two or three expert appraisers or other collectors for their opinion of its value. If you should have one or two rare $2 bills, for example, check with a large library for one of several catalogs of paper currency. The catalog tells you how many were printed and will usually give a range of prices current as of the publication date. Coin, stamp, and currency dealers use such catalogs for reference, but the real market may be in the news sheets offering to buy or sell specific pieces, or a dealer's opinion of its worth. The only figure worth much is the specific dollar amount a dealer or collector will pay.
Investing in collectibles can be profitable. It can also be a fascinating hobby. The best collectors earn considerable i nterest from both.