Collectibles: A way to invest and have fun at the same time
Desirable objects can soar in value, but you need to know what you are doing to buy and sell wisely.
Saturday 01 May 2010
Are you tired of riding the stock market rollercoaster? How do you fancy putting your money into a crate of fine wine or buying a restored Jaguar E-Type instead? Not only will you get to enjoy the item but you may also be in line for bumper returns.
Welcome to the quirky world of collectible investments. Most financial advisers warn it is easy to lose a fortune if you put money into alternatives, which includes everything from stamps to antiques, but millions of people still include them as part of their overall portfolio.
It is certainly a hugely diverse sector. Some people focus on specialist smaller items like collecting cigarette cards or rare comics, while others like to put their faith in bigger ticket items they hope will make thousands of pounds at auction.
Their argument has been strengthened during the recession with demand remaining strong for really good-quality items, according to Judith Miller from TV's Antiques Roadshow and the co-author of Miller's Collectibles Price Guide.
The idea of buying something tangible, such as a music box or 19th century vase, grew in popularity during the financial crisis as people became increasingly disillusioned with seeing the value of their investments plummet overnight.
"They have done much better than most other investments," she says. "Do you want a piece of paper over which you have no control or something really nice like a table that you can not only enjoy but eventually sell for a good price at market?"
Of course, they are not a guaranteed route to riches. "It is the same as with any other investment," she adds. "If you are forced to sell at a bad time you can lose money, but if you can hold it until the market goes up then you will do well."
However, alternative investments need to come with wealth warnings attached, according to James Daley, money editor at Which? While there is no doubt some items have fetched big money, they need to be treated with extreme caution.
"It might seem like an exciting idea but these investments are only suitable for a minority of investors," he says. "Not until you have a cash reserve and a relatively large portfolio of equities, bonds and property should you even consider them."
Even at that stage people must proceed with care. "You must read the small print very closely as there is not as great scrutiny of these as you get with regular investment funds which means you can be entering the unknown," suggests Daley.
Being able to properly value items can be difficult so research is essential. "You need to ensure you are getting a fair price when you buy – and also when you sell, so you will need to ask plenty of questions before making your final decision," he adds.
So for those people still attracted to the idea, what areas are worth investigating?
If you can resist uncorking the bottles then wine may prove to be a lucrative longer-term investment, but you need to be extremely careful what you buy.
Investors have certainly enjoyed decent returns in the past from stockpiling a selection of the finest wines produced by the top chateaux of Bordeaux and then selling them for a handsome profit.
In fact, some of these examples have passed into wine investment folklore. A case of Le Pin 1982, for example, cost just £200 when it was released, but was worth about £25,000 a few years ago – a staggering increase of more than 12,000 per cent.
However, investing in wine is a very complex subject so you must put time into researching the area before deciding whether to get involved. As with any alternative investment, the golden rule is: only risk what you can afford to lose.
Football is the big seller in this area and demand has remained fairly stable over the past few years, according to David Convery of Convery Auctions. "The right things will sell at the right times because people are still going to matches and collecting memorabilia relating to particular players and clubs," he says.
A good idea is to collect items relating to young players that are being tipped for the top. "Look at the headlines to see who is being courted by the big clubs," he adds. "People like Gareth Bale of Tottenham Hotspur are seeing their stock rise."
However, you need to be fairly selective about the items purchased. The sheer volume of autographs – some genuine, some fake – on eBay has dampened valuations severely, but there is still demand for more unusual items.
"If you can get your hands on a player's actual kit, that is what will bring in the big bucks further down the line," he says. "For example, a replica shirt signed by Wayne Rooney is probably worth about £50 – but a match worn version could make £1,000."
This summer's World Cup could also provide an opportunity to make some money, depending on who emerges victorious. "If you are out in South Africa and get some nice items from the tournament – especially relating to the winners – then they could be worth money if you cash them in straight afterwards," adds Convery.
For the real petrol head, the lure of being able to buy a classic car will be almost irresistible, whether their budget stretches from one of the modest hot hatches, such as the Peugeot 205, to a pristine Ferrari.
The good news is that the market for classics has been extremely buoyant over the past couple of years, according to Tim Schofield, the UK head and director of the motor car department at the auction house Bonhams. In fact, nine out of 10 cars coming under the hammer during the first two sales of this year were found new homes.
"If you have got money earning nothing in the bank, view the stock market as a bit hit and miss, and have petrol in the veins, then why not buy an old car?" he says. "It is a tangible asset that is kept in your garage and you cannot put a figure on the fun you get out of its use. Also, as long as you buy sensibly and it does not end up needing a lot of work done on it, it might increase in value two or three years down the line."
Cars increase in value for a variety of reasons. Sometimes it can be a manufacturer producing great modern cars that rekindles interest in their predecessors, while others shoot to prominence celebrating an anniversary for a particular model.
Recently, for example, Maseratis from the 1960s and 1970s have been in demand, as well as Porsches from the 1980s, while Aston Martins have consistently enjoyed decent valuation growth.
"My advice is to do your research and ask questions," says Schofield. "If you have narrowed your sights to a particular make, model and type, then go and see the best car you cannot afford and use this as the benchmark on which to judge the others."
The future success of the sector depends on new people getting involved. "The lifeblood of any business is to keep your established clients happy and attract new people into the sales rooms," he adds. "This year, up to a third of people attending our auctions are new clients to Bonhams, which can only be good news."
Building a stamp collection may involve a trip down memory lane to your childhood – but pick wisely and it could end up being a lucrative journey with some unique examples selling for millions of dollars.
According to Geoff Anandappa, investment portfolio manager at Stanley Gibbons, the rarest stamps have delivered annual average returns of around 9.7 per cent, with the prices being driven mainly by collectors.
"These stamps can be a good way of diversifying your portfolios because they do not correlate closely with any other asset classes," he says. "Collectors are buying and selling millions of pounds worth of stamps every day."
The most expensive – valued at US$2.97m – is the 1868 1c Benjamin Franklin Z-grill, owned by the PIMCO fund manager Bill Gross. There is also Sweden's Treskilling Yellow stamp which is coming up for auction next month in Switzerland.
However, even smaller value stamps have performed very well in recent years, according to Anandappa, who cites the Penny Black – the world's first stamp – as a prime example.
"It is not rare as 60 million were printed but unused examples have increased in value," he says. "Five years ago we were selling them for around £4,000 but now they are going for £10,000. However, this is not unusual for rare stamps."
So how should people start? The key is finding a reputable dealer that can help guide you through the process. "I would advise people against buying on eBay or via auctions as they really need to know what they are doing," adds Anandappa. "For example, we have about three million stamps in our London shop but only 150 are recommended for investment purposes."
* Miller's price guides
* Invest drinks
* Convery Auctions
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
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