Coins, baseball cards; looking for returns beyond stocks

People put money into race horses, coins, trading cards, fine art, wine
and action figures. You could consider all those things hobbies or
passions. But are they investments? When stock portfolios and
retirement funds falter, investors look to offbeat or exotic places to put
their money.

Of course, the definition of exotic differs from one person to
another.

“For one person, exotic might be a Nasdaq stock, something
not on the New York Stock Exhange, for another investor, exotic might
be buying alpacas and raising them for fur,” said Scott Smallman, Senior
Vice President of Wedbush Securities in Seattle.

Collectibles, such as art or baseball cards, can offer a great return
on investment. “My brother, when we were growing up, amassed a
hockey card collection that was amazing and he sold it [earning] more
than enough for a down payment on the purchase of his first home,”
recalled Smallman.

Recently, a family in Ohio found a pristine collection of old baseball
cards in an attic valued conservatively at $3 million. You might call that
luck, or an investment that paid off. Smallman knows it’s tempting to go
for something different when traditional investments have languished.

Smallman was asked if it ever makes sense to put money into things
such as art, coins, fine wine, rare books or classic cars.

“If they’re doing
it for investment purposes, I would say that would be rare. If they’re
doing it because they’re interested, because it’s fun or it’s something
[where] they’re getting a psychological rate of return beyond a financial
rate of return, then it starts to make more sense to look into.”

There’s another consideration. When you buy a stock, it’s an
electronic transaction. But when you invest in a collectible, it’s a physical
asset that is subject to depreciation, damage or destruction from fire or
theft, for example, and might require insurance, which can eat into the
value of the investment.

It’s important to know your collectible before you invest, otherwise
the results could be disastrous.

“When everybody was buying beanie
babies and they were selling them in the secondary market for well more
than they cost when you were buying them at the store, guess what?
That just collapsed and so those that knew more took advantage of
those who knew less,” warned Smallman.

Investment timelines are important to consider. Smallman
recommends either a very short term investment or a very long term. If
you time it right, you can profit on a hot item. Otherwise, collectibles can
take a long time, some suggest 20 years or so, to significantly increase
in price.

So, whether it’s Star Wars action figures, comic books, an ostrich
farm or any other offbeat investment, Smallman figures that “successful
investments of this nature start with passion and end with the
investment.”