Investors love to diversify their portfolio and many have turned to collectibles as an alternative investment to supplement their stocks and bonds. However, the biggest difference is that the value of a collectible is largely determined by how much a buyer (usually another collector) is willing to pay for the item rather than current market value. If you are going to invest in collectibles, here are some things you should know.

Rarity

The most important thing that determines a collectible’s value is rarity. Take baseball cards for example. Cards produced from the 1950s – 1970s have a much higher value than those produced from the1980s and beyond. Why? Not just because they are older, but because card manufacturers glutted the market in the 80s. The same thing happened with comic books in the 1990s. A particular Hummel figurine may be worth a lot to one particular collector who really wants it, but if it was over-produced then it isn’t worth very much to collectible dealers. If you are counting on your childhood comic book collection to net you a fortune, you will likely be disappointed. Unless something has a good degree of rarity, it isn’t a very valuable collectible.

Treasure Hunting

One big advantage of collectibles is that you may find stuff lurking in your attic or basement that you can have appraised and sell. This is complete profit for you since you didn’t pay for the item in the first place. The same thing goes for family heirlooms if you’re willing to part with them. The next best thing is, if you have knowledge of collectibles, you may be able to spot items at estate sales, yard sales or flea markets that you can resell and see a good profit. However, this takes a good knowledge of collectibles to begin with. Buying from dealers rarely works out to be a good investment as dealers price items so high that it is nearly impossible for a buyer to resell them for a profit.

Condition

The condition of a collectible is also a big indicator of its value, which can make some collectibles very difficult to sell. Most collectibles have some kind of guide dealers’ use that determines their value based on the amount of wear and tear the item has, just as you would seek the advice of a guide or professional when looking for stock picking advice. If the item isn’t in very good condition, it would be worth 50% or less of its “mint” value. Finding items in good shape can be a very time-consuming task. Additionally, once you find items that are in good condition, you have to keep them that way until you sell them. Keeping items mint usually means purchasing some sort of protective case and storing them in ideal conditions. This can reduce your return on investment (ROI).

The bottom line is that collectibles are worth investing in if you love collectibles, it is more of a labor of love. In terms of dollars and cents, the collectible market sees only a fraction of the return on investment that investors make from the financial market. Although, that being said, it is still an opportunity to make money if you are genuinely interested in collectibles and/or antiques.