Collectors: Do You Think Your 'Treasures' Are Your Nest Egg?

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One of my simple pleasures is watching "American Pickers" on the History Channel. Mike and Frank travel the country looking for items of value in people's collections. They take the items they buy and sell them in one of their stores (hopefully at a profit). The show supports the notion that one person's rusty junk is another person's treasure.

On the program, viewers meet interesting characters, many of whom have spent their lives collecting. Most aren't trying to get rich quickly but, rather, are collecting things they connect with. I get that, as we all have things we enjoy, but there is a fine line between collecting and going overboard. While many of these collectors have items that are worth considerable amounts of money, many have houses filled with junk.

For the most part, the individuals on shows like "American Pickers" don't cross the line into the dark side of collecting -- hoarding. However, there are times when compulsive hoarding tendencies are at play.

But what's really caught my attention lately isn't the ones who have allowed their collections to take over their lives and envelop their homes. It's the number of people on TV shows like this who claim that their collection is their retirement portfolio. They appear to be doing little else in terms of growing wealth or preparing for the future.

A good collector may acquire some fairly valuable items over the years. But is this really a viable way to save for retirement?

Is Collecting a Justifiable Retirement Strategy?

I would equate collecting with investing in penny stocks: In both cases, you're putting your money into an asset class where there can be significant risks:
  • Value. Assets are worth only what someone else is willing to pay for them, and it's not always easy to find a buyer. That will make it hard for you to put a true value on your collection.
  • Limited protection. This is especially the case when it comes to dangers like theft, loss in value or fire. True, you aren't guaranteed against losses while investing in stocks either, but there are methods to limit them.
  • Few insurance options. Unless you have riders on your homeowner's insurance, there is no way to protect against loss in value. This is opposed to Federal Deposit Insurance Corp./Securities Investor Protection Corp. insurance coverage through a bank or brokerage.
  • Glut in the market. New items entering the market will drive down prices. Again, this is going along with the idea that something is only worth what someone else will pay for it.
  • Complications. Handling an estate when a person passes is difficult enough. Adding the need to sell items makes the process harder.
Collect for Passion, Not Retirement

Just because a collection isn't generally something you should rely on for your retirement nest egg doesn't mean you need to write collecting off altogether. If you have a hobby, or there's a type of object you enjoy, by all means collect with those things in mind. Just be reasonable, and if you're married, make sure your spouse supports your hobby.

Vehicles like a 401(k) through your employer or individual retirement account through an online brokerage should be your major avenues for retirement saving. A collection -- particularly of items that have a history of holding their value -- can provide a small supplement to your portfolio. But basing your retirement strategy around one is a risky way to prepare for the future.

John Schmoll is the founder of Frugal Rules, a finance blog that regularly discusses investing, budgeting and frugal living. He is a father, husband and veteran of the financial services industry who's passionate about helping people find freedom through frugality. He also writes about wise ways to manage your money at WiseDollar.org.


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9 Comments

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Al Schrader

I wouldn't suggest buying anything as an investment, but there are some exceptions.
Some people moved out of building B when I lived in an apartment and tossed most of their stuff.
There was a painting leaning against the dumpster. I looked at it - had a tobacco tint to it and was really not done by what I would consider a master - I can paint a lot better.
But being nice I showed it to a neighbor, Rosemary, and she liked it so I gave it to her.
She had it appraised. Turned out it was a "Williams" from 1894 worth $600.00
Today it's worth $6,000.00 Go figure.
Right now any wall size canvas, like 24 x 36 inches starts at $100.00 even if it only has a slash of paint put on it with a 2 inch hardware store brush.

June 12 2014 at 5:41 PM Report abuse rate up rate down Reply
1 reply to Al Schrader's comment
Valerie

@ Al --- your comment is a good example of falling into the trap of thinking in terms of what stuff is "worth". Sooooooo easy to do this. Much harder to get someone to write a check to buy it for what you think your item should be "worth".

Art, of any type, is subject to wild fluctuations in price. Often, falling into the price cellar, practially overnight. Particularly so, in tough economic times. As such, art is one of the worst things to buy, hoping to make a huge profit on the resale.

The only exception to this is that very, very, VERY small group of paintings, by well-known old masters, which are individually valued in millions of dollars and usually change hands at high-profile auction houses patronized by very wealthy art collectors.

June 12 2014 at 6:56 PM Report abuse rate up rate down Reply
RICH

Hit home for me when I cleaned out my mother's home after her death; netted about $5,000. total for the contents of a 4 bedroom home. Stuff is a very poor investment, collectables probably even worse, much better collecting stocks, bonds, and cash for your retirement..

June 12 2014 at 5:28 PM Report abuse +1 rate up rate down Reply
LucasWires

My mother had a big box full of Avon "collectibles". Most of it was at least thirty years old. At some point she needed cash and asked me to put it on eBay. Although I've been quite successful selling stuff on eBay, nobody wanted that junk. I gave it to Goodwill and just gave Mom some money.

June 12 2014 at 3:41 PM Report abuse +1 rate up rate down Reply
standfordgrays

I am not a material person. Everything I own can be loaded into an SUV plus a bed. However, this writer is wrong. A lot of those possessions in the homes of the people in that TV show were bought for a dollar or two and are now worth $50, $100, $250 for a very serious return on investment. Plus, the banks aren't going to control what those possessions are actually worth through a centralized exchange that acts as a bottleneck.

Now, an antique dealer pointed out that values can change with public fads coming and going... Guess what, stocks are the exact same way. Take a look at Tesla Motors right now and their never making any money yet the stock is over $200 fad. The whole 3d printing sector went through a 6 month fad in the first half of this year. Isn't it funny how SSYS actually makes money and Tesla doesn't yet Tesla's stock is worth twice as much ?....So, there are popular movements that inflate prices in the stock markets the same as there is in antiques and other collectibles.

Next is the worry that all of a sudden there isn't going to be a buyer for your collectibles. Same goes for the stock market. Pick any blue chip stock out there and research it. It's daily volume will be a fraction of it's float.. So if everyone suddenly decided to sell one day, there would not be enough buyers out there for over 90% of the sellers.

In the end, whether it be precious metals like gold and silver, a colonial desk, or a blue chip stock.. It is all a gamble that may or may not pay off. I personally leave my money in the bank till I see something depressed that I can turn a profit on. It may be a motorcycle, stocks during a recession, a piece of real estate, or whatever... Charlie Munger said "There are worse things than sitting on a pile of cash"... and I have found that to be very sage advice. You can't jump on a great opportunity if your money is locked up in a safe investment vehicle. And everything a financial advisor tells you about retirement accounts is crap. I get that an employer matching 401k can be a good money play since the employer is matching your money, but the average 401k holder to date will pay around $92,000 in fees over the course of the fund. If you sit on real estate, there are taxes and your neighbors can ruin your investment by letting the area go bad. When it comes to eliminating risk, it is better to sit on cash and look for can't miss opportunities to get in and out quickly for a strong 30% plus gain. I can sit on my money for 2 years, then make a play to get a 30% return in less than 1 year and do better than what someone will do buying stocks over the same 3 year period. Unless it is something freaky like Tesla stock. Which I actually was the first person to buy on a secondary exchange for $19 a share when it IPO'ed. If my money had been in IBM for retirement, I never would have been in a position to buy TSLA..

Time in itself is a risk... so avoid having your money locked up for a long time.

June 12 2014 at 12:24 PM Report abuse -1 rate up rate down Reply
1 reply to standfordgrays's comment
standfordgrays

think of it like this... putting money into investments is like playing with fire... and fire can be good in that it keeps you warm and cooks your food, and it can be bad when it burns down your house and spreads across half the state. so playing with fire has both rewards and consequences..

but never think there is anything absolute in this world like the writer is telling you... The person that bought an old desk and found a copy of the declaration of independence in one of the drawers will make more money than anyone else in the stock market with the same $1500 investment.

so many people say buying lottery tickets is foolish, yet someone in Tennessee won $250 million off of $2 last night. Good luck getting a $250 million dollar return with a $2 play in the stock markets in less than a week.

In the end, don't let anyone tell you your business or influence you... Live and learn and enjoy the ride. Dump cash into baseball cards, or old railroad lanterns, or bars of gold, or shares of Google, or that 10 acres in the country you always dreamed of.... We are all going to die one day anyway and saving every dime for that last day is the only thing that is stupid.

Money loses value over time with inflation... If you can buy and sell stocks today, then you can do it when you are 85. Same goes for real estate. start a business with whatever trade you have mastered and then hire people like yourself to work it and growing old will never be a concern.

June 12 2014 at 12:39 PM Report abuse -1 rate up rate down Reply
bdgrizcp

As you get older, it should be your resposibility to liquidate your collection(s)--not your heirs. They have enough to deal with. This is especially true if you have already outlived your llife partner (or are single), and doubly so if you rent.

June 12 2014 at 8:56 AM Report abuse +4 rate up rate down Reply
Valerie

I'm a retired antique dealer, so this article caught my attention. The writer did a good job of assessing the elements of collecting. Most collectors do tend to over-value the items they have. And, they also believe they can "cash in" on that collection when they retire.

Some other things the writer should have mentioned --- and didn't --- are:

The antique and collectible market is very subject to fads of the moment. There is always a current "hot area" of popularity. Everybody chases after this particular group for a while. Then, suddenly, it goes dead --- seemingly overnight. Suddenly, no one wants that, any more. Some notable examples of this: Amish antique quilts, Disneyana, and Avon collectibles.

Thanks to the popularity of TV programs like Antiques Road Show, most collectors believe their collection is worth big bucks because Road Show consistently tells people VERY inflated values for the items on the show. (Whenever I need a good laugh, I watch the Road Show. LOL)

Pictorial "collector's books" are another source of hugely inflated prices. The individual collector is extremely unlikely to get anything near these prices when they want to sell their collection. Also, any potential buyer will "cherry pick" your collection for the one, or two items, they want --- and then tell you they are not interested in the rest of the items you have. Reality is --- you will be lucky to get even 20% of those pie-in-the-sky prices from collector books or ARS.

Condition, high-quality workmanship, and scarcity/rarity are highly important. Only items in absolutely perfect condition in the category of one-of-a-kind or few-of-a-kind are desirable and sellable. You will likely not be able to get anyone to buy all those other items you have of lesser quality, except for a few bucks at a garage sale. This is particularly true of collectibles from the 20th century. These items were mass produced by the millions.

Something else collectors don't like to think about --- "antique" is not another word for high quality. There was plenty of junk produced in every era, including past centuries. People tend to think, if they find something old, it is always very valuable. This is just not true.

Last, but not least --- when the economy is bad, the antique and collectible market is one of the first areas to show the effects of that. Prices for most classic collector cars are down by 40-50%. Even high-end auctions (like Sotheby's and Christie's) are feeling the effects of this. Only the very top of the collecting "pyramid" (those one-of-a-kind rarities) is still bringing top money.

So, I agree with the person who wrote this article on collecting. Enjoy your hobby. Treasure hunting is fun. But, don't fall into the trap of thinking you are sitting on a gold mine that you can tap into for retirement.

June 12 2014 at 8:55 AM Report abuse +5 rate up rate down Reply
pfjw

Mpfffff... I have a smallish collection of vintage electronics, and for the sake of my wife (and the kids), I have given her the names of several fellow collectors that she may call upon for a fair shake in the case of my untimely demise. And I am on several of their wives' lists as well.

Carefully managed and sold properly, I am guessing I have something in the range of $50,000 worth of 'things'. Sold at an estate auction, I expect that same collection would realize about a 10th of that. Hence the precaution.

June 12 2014 at 8:24 AM Report abuse -3 rate up rate down Reply