Thinking of investing in vintage collectibles or antiques? Don’t make these 5 big mistakes that plague many collectibles investors!
1) Believing that what worked in the past will work equally well in the future
Although this myth isn’t unique to collectibles investors (indeed it is often shared by financial advisors and pundits), that doesn’t make it any less dangerous. The logic goes like this:
Because this (fill-in-the-blank) collectible has appreciated strongly over the past 5, 10 or 20 years, then it must be destined to deliver good returns in the future as well. So you should load up on those late 1970s Star Wars toys, Mid-Century Modern furniture or vintage Coca-Cola memorabilia.
But this superstition runs afoul of the old investing adage, “past performance is no indication of future results.”
What happens instead is that the collectible in question eventually runs into the law of large numbers. In a nutshell, this dictum states that it becomes increasingly difficult to compound growth as values rise ever higher. I’ve already discussed this fascinating concept in greater detail as it applies to the rare U.S. coin market.
Let’s conduct a thought experiment. Early Star Wars toys are valuable today because the movies were so successful – an outcome nobody expected at their initial release in 1977. Everybody in the world has heard about Star Wars at this point. How does the franchise get any bigger or more famous?
If you are buying vintage Star Wars toys today hoping to see the same investment returns they’ve experienced over the past 40 years, you are implicitly hoping Star Wars becomes even more culturally influential in the future. While this outcome isn’t completely impossible, it is exceedingly unlikely.
2) Expecting low quality collectibles to appreciate in value
Collectibles investors are faced with a marketplace that is absolutely saturated with low quality vintage junk. Antique malls, thrift stores and flea markets are all overrun with poorly made plastic and cardboard memorabilia from the 1970s, 80s and 90s.
Beanie babies, Cabbage Patch Kids, (post-1980) baseball cards and (modern) comic books are just a few examples of these junk collectibles. These throw-away items (and many, many others just like them) were mass-produced by the millions with little thought given to their durability, craftsmanship or future desirability. This sad state of affairs is reflected in their pricing, where these collectibles are almost universally available for just a few dollars each (and oftentimes even less).
It can be a minefield trying to avoid these junk vintage items. For example, in the 1980s the Swatch Watch was a cultural phenomenon. These boldly colored and strikingly styled wristwatches were churned out by Swiss watch manufacturers in an attempt to win back some business from the flood of cheap quartz models that had decimated their market share in the late 1970s.
But Swatch Watches were meant to be low-priced, consumable fashion items. They were usually made from plastic cases with either cheap mechanical or quartz movements. In contrast, Seiko – a Japanese mid-tier watch brand – built mechanical watches during the same period to a much higher standard than Swatch Watches.
As a result, although vintage Swatch Watches look like they should be great collectibles, they are actually pretty terrible. On the other hand, collectibles investors can’t go wrong with desirable vintage Seiko mechanical wristwatches. Quality matters.
3) Ignoring demographic trends
Many collectibles investors don’t understand that (at least part of) the antiques market is a popularity contest driven primarily by demographics. In other words, popular vintage collectibles are generally fondly-remembered childhood items from the prime collecting demographic – people aged from their mid 30s to early 60s. Today, this primarily means collectibles from the 1970s and 1980s.
But while this is a well-documented phenomenon, collectibles investors will have a hard time cashing in on it. This portion of the collectibles market is often driven by whacky, unpredictable fads that make entry and exit points impossible to time with any degree of accuracy.
For instance, Elvis Presley memorabilia was huge in the 1980s and 1990s. Middle-aged Silent Generation and Baby Boomers couldn’t get enough of Elvis, who had been a staple of their youth. Late night television infomercials hocked Elvis commemorative plates, compact discs and figurines, among other things. Antique stores burst at the seams with vintage Elvis items. And it all sold too.
But where was the peak for Elvis memorabilia? Was it in 1983? Or perhaps 1989? Or maybe it was in 1996? I don’t know the answer to that question. And I doubt anyone else knows the answer, either. However, during those heady days it would have been seductively easy to convince yourself that the gravy-train would never end and that Elvis collectibles would remain popular forever.
But if you did believe the hype, you would have eventually paid for it. Today, Elvis’ fan base is dying off and his memorabilia is in terminal decline, with prices relentlessly dropping year after year.
Instead of chasing mercurial demographic fads, I believe most collectibles investors would be better served by sticking to high quality items with classic styling. Even if they go out of fashion temporarily, they will always become popular again at some point in the future due to their high build quality and timeless air. The Antique Sage’s 5 rules for investment grade antiques can help you choose the right vintage items.
4) Buying items that are damaged or in poor condition
Nothing can tempt a person to buy like low, low prices. And collectibles investors are all too human in this regard. But many times those low priced vintage items are cheap because they are either damaged or in poor condition.
However, savvy collectibles investors understand that there is no substitute for good condition. Yes, sometimes an item with certain material defects or age-related issues can be successfully restored. But even a successful restoration will invariably lower the value of a vintage piece versus a pristine, unrestored specimen.
The lesson here is clear. Always keep a close eye on condition (including any restorations) and don’t be afraid to walk away from a collectible or antique that has taken one too many dings.
5) Being unwilling to pay a modest premium for superlative pieces
This is a topic near and dear to my heart because I’ve learned about it the hard way. I previously wrote an antique investing article recounting my personal experiences with “the one that got away“. Unfortunately, this theme – failing to pay-up for terrific specimens – dominated the article.
One day you will come across a particularly fine collectible or antique. It may be in completely original, perfect condition. Or perhaps it will be an extremely rare item. It is even possible that a confluence of many different factors will combine to create a truly outstanding piece.
But when that day comes, you should open your wallet and happily pay the seller his asking price. As long as the price tag isn’t truly exorbitant, you will almost certainly make money by following this strategy. Don’t let $100 or $200 stand between you and a proverbial investment gem.
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