Collectibles as an Investment: Art, Classic Cars, and LEGO Sets

In recent years, the investment landscape has seen a notable shift towards alternative assets, and collectibles have gained significant traction among investors looking for ways to diversify their portfolios. Collectibles can include a wide range of items such as art, classic cars, and even LEGO sets believe it or not! In this blog post, we will delve into the world of collectibles as an investment choice, examining the potential financial returns, the influence of market trends, and the considerations one must take into account when adding these unique assets to an investment portfolio.

Art as an Inflation Hedge

In an environment where inflation is a concern, traditional assets such as stocks can be volatile and may not always preserve purchasing power, this has been evident over the last few years post-Covid. However, according to Christophe Spaenjers, a finance professor at the Leeds School of Business, highlights that alternative assets such as art can serve as a valuable hedge against inflation. Art and other real assets often appreciate in value even when traditional investments suffer due to rising prices.

Art prices are not directly tied to financial market fluctuations because they do not generate income streams in the same way that stocks or bonds do. This means that during periods of high inflation, art can continue to appreciate in value, providing a safe haven for investors. Nevertheless, Spaenjers cautions ordinary households against investing in art solely for financial gain, suggesting that other assets might be more suitable. Instead, wealthier individuals who can afford to consider nonfinancial returns and the enjoyment of the artwork might find art a fitting addition to their investment portfolios. However, with the right expertise, even ordinary households and investors can invest in collectible opportunities.

It is important to note that success in art investing requires a deep understanding of the market, knowledge about artists and collectors, and often, a bit of luck. Moreover, the uniqueness of each art piece means that broad market indices may not accurately reflect the performance of individual artworks in a collector’s portfolio. For less wealthy investors interested in this space, fractional shares and investment vehicles may not be the optimal route due to high fees and other potential complications.

Finding Collectible Art

For those considering investing in art, it’s not just about financial returns; it’s also about having the aesthetic value it adds to your home, but sometimes the piece isn’t able to fit in your home, so how do you present it to friends or your other peers? Firstly, the value of art is subject to various factors, including the artist’s reputation, the authenticity of the piece, and its provenance. To gauge the potential value of artwork, prospective investors should research the artist’s popularity and consult with experts before making a purchase. Auction houses, both physical and online, are excellent venues for sourcing collectible art. Falcon Co do this on behalf of our clients with extensive due diligence.

Investing in art not only allows you to diversify your portfolio but also offers the pleasure of owning and enjoying beautiful pieces. In addition to art, other collectibles like comic books, trading cards, and celebrity-owned items can also be part of a diversified collection. While the amount spent on collectibles can vary widely, the market offers options for various budgets. As such, art can be a long-term investment that not only beautifies your living space but also has the potential to appreciate over time.

Finding the right art takes time. How do you know if it will appreciate? How do you know if it’s well looked after? This is why you need an expert.

Classic Cars: A Road to Diversification

Hagerty, the world’s most extensive provider of specialty insurance for classic vehicles, annually publishes its Bull Market List, identifying collector cars anticipated to see significant value gains. Despite challenges like the pandemic, the collector car market continues to present investment opportunities.

For instance, the 1989 Lamborghini Countach 25th Anniversary edition, which commemorates the founding of Automobili Lamborghini, is known for its powerful performance and iconic design. However, potential investors should be aware of the high maintenance and repair costs associated with such vehicles. So, there is benefit of having someone manage this maintenance as it appreciates in value, thereby being crucial so you’re saved of the responsibilities of the high tailored care these machines require.

Classic cars like the 1946-1950 Chrysler Town & Country, with its rare wood panelling, have a niche market. The restoration and maintenance complexity of such features can greatly influence the car’s value, which can range significantly.

As time moves on, cars from even 20 – 30 years ago can suddenly surge in value, and Falcon Co always keeps an eye on these trends in order to capitalize on opportunities.

When considering investment in collector cars, it’s crucial to factor in repair costs, market trends, and the potential for appreciation. It’s a unique way to diversify an investment portfolio, but it requires careful consideration and, often, a passion for the vehicles themselves.

Just like art, passion plays a significant part in the upkeeping of value in classic cars. They aren’t owned they’re curated too.

Bespoke Collectibles: LEGO – Building Blocks of Investment

In an intriguing turn, collectible LEGO sets have emerged as highly sought-after items. A report by Deloitte and eBay highlights the increasing interest in LEGO among Australian collectors. The survey, which included nearly 4,000 Australians, found that over a quarter of the population identifies as collectors, with LEGO ranking high on their list of desirable collectibles. Coins take the lead at 36% interest, followed by LEGO sets at 26%. Other popular collectible items include toys, sneakers, and art. The report reveals a split among collectors between those collecting for financial gain and those who do so as a hobby. Notably, nearly half of the financial-focused collectors expected returns ranging from 50% to more than double their investment.

LEGO sets also appeal to individuals with higher incomes, possibly due to their nostalgia and the enjoyment derived from building and displaying the sets. eBay sales data from 2019 to 2022, which coincides with the popularity of the reality TV show “Lego Masters,” showed significant price growth for selected LEGO sets. For instance, the Grand Carousel’s average price increased by 20%, while the Kings Castle box saw a 200% surge in value. Darth Maul figures also enjoyed a healthy gain of 85%.

It looks just like a regular Star Wars lego piece doesn’t it? But it sold for $15,000 at auction in 2007 in Las Vegas.

While LEGO sets are popular, one downside is their liquidity. Unlike more traditional asset classes like bonds, collectibles can be challenging to liquidate quickly. However, the simplicity and low administrative costs of collecting LEGO make it an attractive investment option, especially when compared to savings accounts. When appropriate to illustrious art and classic cars however, there is an extensive secondary market for those wishing to liquidate their assets, and again – not tied to the traditional markets – which is why so many high net worth individuals use collectible funds as an investment diversifier.

Conclusion

Investing in collectibles is a fascinating and multifaceted avenue for diversifying one’s investment portfolio. Whether it’s the timeless appeal of art, the allure of classic cars, or the

nostalgic charm of LEGO sets, collectibles offer a unique combination of financial potential and personal enjoyment.

However, investors must approach this market with caution, armed with thorough research, expert advice, and a clear understanding of the risks involved. Collectibles can be unpredictable, and their value is influenced by numerous factors that may not always align with broader financial markets.

For those with the means and the passion, collectibles can be more than just objects of desire—they can be a strategic and rewarding component of a well-rounded investment strategy. As with all investments, the key is to balance the joy of ownership with the potential for financial gain, ensuring that the investment journey is both profitable and pleasurable.