Collectibles Shield Your Money From Market Volatility

My back is killing me this week. You can probably hear it crack from where you are!

See, over the weekend, I helped my mom pack up the house, which meant we spent eight hours hunched over boxes, cursing our tape dispensers every time we ran out.

But this was a good thing. My mom finally decided to downsize, which I’ve been pushing her to do for years. Taking care of a two-story house by herself, an hour away from work, just wasn’t the best scenario for her.

It was time to let go of a few things.

But here’s the unexpected plus that made me forget about any packing aches: I got the chance to dig through my childhood things. I paged through some dramatic journals from my preteen years, found an old jacket I fell out of a tree in … and stumbled across some legitimate treasures.

There are fortunes to be made in collectibles. But they underscore something more important. They showcase how smart it is to diversify your wealth.

At the very back of my bookshelf, I discovered a vintage, teacher’s edition of The New Fun With Dick and Jane. This is the book my grandmother taught my mother to read with, and what my mom, in turn, taught me to read with.

That’s pretty invaluable to our family. But it’s also worth something to complete strangers … because, as you might have guessed, it’s a collectible.

The cover is a bit weathered, but this 1950s edition has been known to sell for upward of $450. I found a few others in the series from the 1940s, and those also go for hundreds online. Authentic first-edition copies of Elson-Gray Basic Reader: Pre-Primer (which is in the series) can now command a $4,275 price tag.

Say you grabbed one for about $10 at a garage sale. (Many people don’t know what they have, after all.) That’s a 42,650% gain.

The same appreciation goes for other classic children’s books. A first-edition Curious George sold at Heritage Auctions for $26,290 — and it went for $1.75 back in 1941. That’s a 1,502,185% surge.

And books are just one category of successful collectibles.

For example, last September, wine claimed the title of best-performing collectible. Fine wine values soared 25% over a 12-month period.

Over the past five years, wine was up 60%. In fact, the Knight Frank Luxury Investment Index found that wine had replaced classic cars as the top collectible.

Just compare that to the market’s five-year climb (as of last September). During the longest bull market in history, the S&P 500 Index climbed 45%.

Meanwhile, collectibles continue earning higher price tags. Art just drove wine off the top of the luxury investment index.

The painting Salvator Mundi by Leonardo da Vinci grabbed a staggering $450 million last year, crushing the previous world record of $179 million set by Pablo Picasso’s Women of Algiers in 2015.

Clearly, there are fortunes to be made in this asset class if you do your research and know where to look. It’s “the purest form of market — simple supply and demand,” says Chris Ivy, a director with Heritage Auctions.

But collectibles underscore something even more important than pure gains.

They showcase how smart it is to diversify your wealth.

Protect Yourself From Wall Street

See, some of the world’s most successful investors are interested in collecting rare items for that reason. Warren Buffett, for instance, has a passion for stamp collecting.

After all, be it coins, comic books or rare wine, collectibles have a history of outperforming traditional assets over time. But even better, they shield your money from Wall Street volatility.

They are steady investments, held by “strong hands” — which means they’re largely owned by aficionados who rarely part with their collections just because of economic tribulations.

That gives them stability and provides a certain counterbalance to your portfolio.

And that’s essential to have — particularly now.

With this bull market now the longest in history, many investors are worried that a crash of 75% or more is coming soon.

Systems expert Michael Carr recently told his readers that, at the very least, another double-digit gain seems unlikely for the market in the next year.

So it’s time to start preparing your portfolios.

It always pays to be prepared.

Catch you next week.

Regards,

Jessica Cohn-Kleinberg
Managing Editor, Banyan Hill Publishing

 

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