THE COSTS OF COLLECTING

Gerry Tebben writes:

When investors talk about collecting, they typically revel in the ability to pursue their passions, have fun and possibly make a little (or maybe even a lot) of money. But there's another side to the collectibles story—and it involves time, vigilance and financial resources.

Yet for collectors who can withstand the lack of liquidity and take steps to preserve value, these can be good alternative investments that aren't correlated with more-traditional markets, says Robert Rosenthal, chairman and chief executive of First Long Island Investors, who collects art with his wife, Jodi Rosenthal.

Here's a closer look at some of those lesser-discussed issues:

The costs of care
Collectibles experts say some beginning collectors don't realize that certain collections need special care and storage for their objects to retain value.

Light and temperature fluctuations are notorious for causing damage to holdings. Paintings, for instance, may require special glass, while fragile items such as textiles and sneakers need temperature-controlled storage.

At-home safes can protect items such as baseball cards, rare coins and antique guns, but they need to be bolted down to prevent theft. What's more, if you choose a home safe to store your collection you should look for one that is fire-resistant.

"The care of each of those collections is very important to the ultimate value, and you can really compromise the value of these collectibles if not properly stored," Rosenthal says.

Inventory and insurance
Just as with traditional investments, collectors need to keep an inventory of holdings for insurance purposes and to track prices to avoid selling at lows or to maximize value.

Keeping good records such as sales receipts and appraisals matter to establish a cost basis. This can affect valuations and potential taxes if the person sells or bequeaths a collection, says Steve Lockshin, co-founder of Vanilla, an estate-planning software firm.

Fakes and frauds
Another pitfall that potential collectors need to be aware of: The collecting boom and ease of buying online has led to a similar boom in fakes in almost all collectible categories.

For example, as precious-metals prices rise, it has attracted new collectors who may not be on the lookout for counterfeit gold and silver coins, says Beth Deisher, executive director of the Anti-Counterfeiting Educational Foundation. Scammers not only create sophisticated websites to fool consumers into purchasing fakes, but new technology can also produce harder-to-detect fake coins.

To read the complete article (subscription required), see:
The Hidden Costs of Being a Collector (https://www.wsj.com/finance/investing/collecting-pros-cons-investment-7fdca799)

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