Rare collectible items can be of value, as demand is higher than supply. This asset class includes art, classic cars, stamps, baseball cards, and recently digital art in the form of NFTs. New types appear (such as NFTs), others fade (such as stamps) or become worthless (for example beanie babies).
Patrick Boyle has a video on YouTube titled: What is the Expected Return on Collectibles? – Beanie Babies & NFT’s it is entertaining and informative.
The conclusion is this: Individual items can perform extremely well financially. For example the people who bought a bored ape NFT for cheap initially did well on that one. As an asset class in general, it under-performs other asset classes. And the maintenance cost can be high, eg storage and maintenance of classical cars, or insurance and anti-theft protection of paintings.
Since these items generally don’t produce income, their value depends on the demand on the open market, and as time passes and interests change, whole classes of collectibles can become worthless. Beanie babies are a good example. Stamps are not the hot topic anymore, and not everyone shares the same enthusiasm about baseball cards.
Collectibles are best enjoyed by people who have enough food on the table already, life without financial worries, and find joy in trading large sums of money for a rare item. For many in this sector, this is not so much about “investment” and making a big return, but about enjoying the item. Heck, if you can buy a classic car for 2 million dollars, enjoy it for a few years, show off to your friends, and then still sell it for double, why not. Sounds like a good deal. But comparing to an investment in Bitcoin, it might turn out to be a very expensive toy.
Investing in collectibles requires time and knowledge. It has to be a passionate hobby or a full time job. To hunt down good deals, to know what you’re buying, to know the market. While one can buy or sell any amount of Bitcoin at any time of day (24/7), collectibles are the least fungible and liquid. You can’t quickly buy or sell a fraction of a classical car.
↝ Continue reading: Bitcoin vs. Altcoins