Many people buy collectibles, ranging from baseball cards and stamp collections to antique furniture and artwork. These items may have great sentimental value and cultural appeal. However, we’re not sure that you should consider these primarily as good investments. Here are some reasons to stay away from collectibles when choosing your investments.

There are significant markups when you purchase a collectible. A dealer may sell you an item for twice what he paid for it. Sometimes the dealer himself is a middleman, so the markup could have been even greater than this. In addition, you may have to cover other expenses such as appraisals, long-term storage, and possibly insurance to protect your collectible in case of damage or loss. Some of these latter fees may have to continue annually for as long as you own the item.

You have to be very knowledgeable about what you’re purchasing. Let’s face it, there are many dishonest people in the world, and you could get stuck with a low value item or even a forgery. Even if the dealer is honest, you may simply be purchasing an item which has some imperfections that you weren’t aware of (such as damage of some sort). Even if the item didn’t have any problems when you purchased it, it can suffer significant damage over time. The temperature, both inside and outside, and many others factors can contribute to the deterioration of your collectible.

The return on investment can be quite disappointing. Let’s assume all of the other items we’ve mentioned don’t discourage you from purchasing a collectible as a so-called investment. You are unlikely to earn returns comparable with the stock market, real estate, or investing in small business. You may even be hard-pressed to keep up with inflation. Hitting a homerun with collectibles (like finding a Nolan Ryan rookie card in mint condition at a garage sale) is rare, and even more reasonable returns would probably require you to anticipate the latest collectible (like the beanie babies or cabbage patch kids) craze well in advance.

If you want to purchase these items as collectibles, that’s perfectly fine. But we don’t recommend that you purchase these as serious investments which you expect to go up in value.