Collecting: A Beginner’s Guide Part 3

Every Monday I’m focusing on a series of blogs all about collecting. A collector-also called a hobbyist-is a very broad term, as can be the items collected. Collections run the gamete from comics, toys, stamps and rocks to watches, cars, artwork and rare gems. A hobbyist begins collecting for one or two reasons, and often both. They collect things they like and they want to make money from it.

For today’s blog I’m going to give some advice if you’ve decided you want to make money from the things your collect. I’m using an old Forbes Magazine article for the foundation of most of these tips, and while Forbes’ audience is looking for advice when collecting the rare and expensive, the advice given can still be applied to the collector on a budget, who also wants to make a bit of profit. So let’s get into it!

Tips on monetizing your collection

1. Buy, hold and trade up. Don’t buy based on what’s popular in the moment, nor what you think may be the next hot item. Get into it knowing you’ll be in it for the long haul. Making serious money from collecting isn’t going to happen overnight. You have to build a collection, give it time to mature and grow in value, and-when the market and the timing is right-sell. Or, trade and trade up!
2. Buy with your head and follow your heart. So this one’s a bit tricky. When it comes to investing in collecting-especially when you’re trying to make money at the same time-buy wisely. Be sure to keep your head in the game when it comes to what you’re purchasing the why you’re purchasing it. When emotions get involved you can overpay and overspend and put yourself in a bind. Still, you’re collecting things that are important to you. If an opportunity presents itself for you to acquire the ever elusive, super rare, hard to find…thing, it may be more important to treat yourself. Personal items that carry meaning and more than monetary value that you can add to your personal collection may be worth the price tag or the trade. In that instance, go with your gut and also don’t forget that this should be fun.
3. Always be learning. Which is sage advice regardless of what you’re doing. In this instance keep striving at becoming an expert. Figure out how to point out fakes or flaws. Know the history behind what you’re collecting. Read books on your items, talk to other collectors, stay in the know, so once you’re on the hunt there’s a much less chance you could be taken advantage of.
4. Know the tax rules. So this tip may not be very sexy, but it’s super important. The IRS delineates between a hobbyist, an investor and a dealer. At any time you could play any one of these roles and depending on which one you play the most could have huge consequences when it comes to filing or paying taxes. It’s important-if you’re taking collecting seriously-to know the rules and know where you stand.
5. Get insured. Since we’re talking real world gains here there’s a good change your homeowner insurance policy doesn’t cover your collectibles. The Forbes article says you’ll need a “personal articles floater” to insure your collection. You can get blanket coverage or itemized. The important thing is to get your collection insured should tragedy strike.

If you want to read the Forbes article in full for yourself, you can check out their website here. It was published back in 2012 in their Investment Guide issue.