Money Matters

ALTERNATIVE INVESTMENTS C LLECTIBLES

With rare Beanie Babies, designer handbags, trainers and even some old mobile phones all returning a healthy appreciation on their initial investment, are collectibles a safe place for your money? Lisa de Silva investigates

Collectibles fall into the category of alternative investments, which are assets not held in stocks, bonds, or cash. They differ from traditional investments because they can be difficult to sell or to convert into cash.

These non-traditional investments can include a wide range of assets, some of the most popular being rare wines, fine art, vintage cars, jewellery, mintcondition toys, books, and handbags. Investors purchasing such objects need to stump up the initial asking price and then maintain the physical condition of the object, all in the hope that it will rise in value over time. WHAT ARE THE BENEFITS

OF INVESTING IN

COLLECTIBLES? With diligent research, those with a genuine passion for a particular collectible can make a great return on their investments. Along with this, the main benefits of this type of investment include: • Diversification of your financial portfolio • Portability of your investment, as physical assets collectibles can be transported and traded across the globe • Opportunity to benefit from a passion and enjoy owning your collectibles while waiting for them to appreciate • The ease with which anyone can start collecting, using online shopping auctions, flea markets and conventional retail outlets • The element of fun and the challenge of sourcing your collectibles can be just as rewarding as actually owning them

WHAT ARE THE RISKS OF INVESTING IN COLLECTIBLES?

The best starting point is to choose an area that you’re genuinely interested in

While investing in collectibles can be more enriching and interesting than other investment vehicles, the drawbacks include: • The initial cost of acquiring the collectible • The need to store and care for collectibles to maintain their condition • The lack of income or dividends they generate during ownership • The potential destruction of the collectible owing to mishandling, natural or human disasters • The risk of fraud – the market in fake collectibles is huge • The lack of liquidity if you need your cash quickly HOW TO INVEST IN COLLECTIBLES During times of high inflation, investors often seek to diversify their portfolios by hedging their bets on commodities and collectibles, but there is no guarantee you will increase or safeguard your money. First and foremost, you either need to be an expert in your chosen field or have access to those with expert knowledge and experience. Also, don’t dismiss the impact of nostalgia on an item’s

value. These ‘nostalgia cycles’ work on a 20–30-year loop. So, things that are popular today, may become valuable over the next couple of decades as people seek to reconnect with their past. Who knew that Beanie Babies would one day be a collector’s item?

As a rule of thumb, most financial advisors would recommend that you do not hold more than 10% of your total portfolio or wealth in collectibles. So, where do you start? The best starting point is to choose an area that you’re genuinely interested in and start curating your own collection. Let’s take trainers, as an example, which are having a bit of a moment. Back in 2007 when they were first released, a pair of Nike SB trainers cost £91. Today, a new, boxed, and unworn pair will set you back at least £4,000. In July 2019, a pair of rare 1972 Nike Moon Shoe trainers sold for a colossal £350,000 and in April 2021, Sotheby’s sold Kanye West’s Nike Air Yeezy 1 Prototype, which he wore in 2008 during the Grammy Awards for £1.5m. To start investing in the trainers’ market, look out for limited edition launches and brand collaborations with fashion houses and celebrities. Keeping them boxed is essential but remember there are no guarantees of a hefty return, so only invest if you will derive genuine joy from owning them. l These ‘nostalgia cycles’ work on a 20–30year loop