Investors usually think of assets as something they would like to own for the long term. When investing in collectibles, precious metals, and gems, the investor owns illiquid real assets, not intangible items represented by pieces of paper. While an asset may be bought for its long-term investment potential, a profit might be earned in the short term. A speculator buys in the hope that someone else will pay more for an asset in the not-too-distant future. Speculators often buy or sell in expectation of profiting from market fluctuations. If you put money into these illiquid assets, limit such speculative investing to no more than 10 percent of your portfolio.
Collectibles
Collectibles are cultural artifacts that have value because of their beauty, age, scarcity, or popularity. They include baseball cards, posters, sports memorabilia, guns, photographs, paintings, ceramics, comic books, watches, lunchboxes, matchbooks, glassware, spoons, stamps, rare coins, art, rugs, cars, and antiques. The collectible markets are fueled by nostalgia, limited availability, and “what is hot to own today.”
Making a Profit on Collectibles Is Not Easy A key to success in collectibles is to invest in quality the higher the better. Although buying collectibles can be fun and easy, turning a profit may not. The only return on collectibles occurs through price appreciation, and you must sell to realize a profit. That could be hard for you to do if the collectibles give you pleasure. Items that are almost certain to lose value include those that are mass-produced and marketed as collectibles or limited editions. Another risk is the wholesale-to-retail price spread. Prices on collectibles vary greatly from item to item and year to year. Markets are fickle. If the investor needs to convert the asset to cash, a sale may take days, weeks, or months, and the seller may be forced to accept a lower price. The collectibles industry is rife with forgeries, scams, and frauds, particularly in sports memorabilia.
Buying and Selling Collectibles on the ‘Net You can buy collectibles on the Internet, using eBay for example, purchasing in minutes what you might never have found after searching for years in magazines, junk shops, flea markets, and auctions. Buying collectibles on the Internet is efficient and convenient, and it is easy to compare products and prices. It’s hard to inspect them before purchase, however. Search Google for “collectibles.” This is a very risky way to invest!
Gold and Other Metals
There is an allure to owning gold. It is beautiful to look at, hold, and own. Gold is a uniquely private, personal, and portable way to hold some genuine wealth. People around the world occasionally invest some of their assets in gold to preserve capital, reasoning that if their national economies crash they will be able to trade gold even if their country’s paper currency is devalued. The prices of gold tend to increase in times of economic and political turmoil, war, and high inflation because investors fear a future that may be worse than today, perhaps a lot worse. Some other metals have a similar appeal to investors.
Collectibles
Collectibles are cultural artifacts that have value because of their beauty, age, scarcity, or popularity. They include baseball cards, posters, sports memorabilia, guns, photographs, paintings, ceramics, comic books, watches, lunchboxes, matchbooks, glassware, spoons, stamps, rare coins, art, rugs, cars, and antiques. The collectible markets are fueled by nostalgia, limited availability, and “what is hot to own today.”
Making a Profit on Collectibles Is Not Easy A key to success in collectibles is to invest in quality the higher the better. Although buying collectibles can be fun and easy, turning a profit may not. The only return on collectibles occurs through price appreciation, and you must sell to realize a profit. That could be hard for you to do if the collectibles give you pleasure. Items that are almost certain to lose value include those that are mass-produced and marketed as collectibles or limited editions. Another risk is the wholesale-to-retail price spread. Prices on collectibles vary greatly from item to item and year to year. Markets are fickle. If the investor needs to convert the asset to cash, a sale may take days, weeks, or months, and the seller may be forced to accept a lower price. The collectibles industry is rife with forgeries, scams, and frauds, particularly in sports memorabilia.
Buying and Selling Collectibles on the ‘Net You can buy collectibles on the Internet, using eBay for example, purchasing in minutes what you might never have found after searching for years in magazines, junk shops, flea markets, and auctions. Buying collectibles on the Internet is efficient and convenient, and it is easy to compare products and prices. It’s hard to inspect them before purchase, however. Search Google for “collectibles.” This is a very risky way to invest!
Gold and Other Metals
There is an allure to owning gold. It is beautiful to look at, hold, and own. Gold is a uniquely private, personal, and portable way to hold some genuine wealth. People around the world occasionally invest some of their assets in gold to preserve capital, reasoning that if their national economies crash they will be able to trade gold even if their country’s paper currency is devalued. The prices of gold tend to increase in times of economic and political turmoil, war, and high inflation because investors fear a future that may be worse than today, perhaps a lot worse. Some other metals have a similar appeal to investors.
Gold Bullion Gold bullion is often thought of as the large gold “bricks” that weigh about 28 pounds that people imagine are stored in Fort Knox. Each is worth more than $100,000. The term simply means a refined and stamped weight of precious metal. Gold bullion is traditionally purchased and traded in 1- and 10-ounce gold bars. Gold is expensive to own. There are fees for refining, fabricating, and shipping bullion. A sales charge of 5 to 8 percent is common. There are storage costs. When gold is sold, the bank or dealer buying it from an investor may insist on reassaying its quality, yet another cost for the investor. The investor may also need to purchase insurance against fire and theft.
Gold Bullion Coins Some costs of investing in gold can be avoided by those wanting to take physical possession of gold bullion itself by owning modern gold bullion coins, each containing 1 troy ounce (31.15 grams) of pure gold issued by the various world mints. The most popular coins are the South African Krugerrand, Canadian Maple Leaf, and U.S. American Eagle. Other gold bullion coins are available, including the Great Britain Sovereign, Australian Kangaroo Nugget, and Chinese Panda. Minimum orders are 10 coins, and commissions are 2 to 4 percent when buying and selling. These gold bullion coins have total liquidity worldwide.
Gold Stocks and Mutual Funds People usually do not invest in gold because it does not pay interest or dividends. Also, gold has been in a bear market for most of the past 25 years, government central banks have tons of stored bullion that they could sell (which would depress prices), and almost no one recommends gold as an investment.
Promoters (and that is the correct term because traders only make money when something sells) always tell investors that they are crazy not to participate in the “ongoing gold boom.” They are confident that economic conditions today are similar to the 1970s when gold prices moved from $38 to more than $800. Investors deeply worried about the future, instead of owning gold, often find it more convenient to put some of their assets in the cash of the world’s two safest currencies, the U.S. dollar and the euro.
Investors wanting to capitalize on world crises and rising gold prices may invest in the stocks of gold mining companies and in mutual funds that own gold companies. You may have heard of the Homestake Gold Mine, one of the early enterprises associated with the Gold Rush of 1876 in the northern Black Hills of what was then Dakota Territory. There are a handful of gold mining companies in the United States and dozens around the world. When there is turmoil in the world and people are fearful about the future, the prices of gold stocks rise, including gold mutual funds and gold exchange-traded funds (ETFs). Search Google for information, and you will find many scams.
Silver, Platinum, Palladium, Rhodium Some less popular metals also appeal to some investors. Silver, platinum, palladium, and rhodium are metals used industrially and occasionally in jewelry. The values of these metals rise and fall with changes in demand. An investor might reason that since palladium is used in auto production that when China’s demand for vehicles increases substantially the price of the metal will soar.
Precious Stones and Gems
Precious stones and gems, such as diamonds, sapphires, rubies, and emeralds, are also examples of high-risk investments. Investors purchase investment-grade gems as “loose gems” rather than as pieces of jewelry. Wholesale firms, not jewelers, sell the best-quality precious gems. The gem certification process may be touted as a science, but it is educated guesswork. Obtaining two assessments of a stone’s quality, particularly on stones of less than 1 carat, is likely to result in a variation of at least 10 percent. Novice investors often buy at retail and then wind up trying to sell at retail. This approach is the opposite of smart investing—that is, buying low and selling high. Sales commissions on precious stones are high, and reselling is very difficult. Losing 15 to 50 percent of one’s investment upon selling is common.
Gold Bullion Coins Some costs of investing in gold can be avoided by those wanting to take physical possession of gold bullion itself by owning modern gold bullion coins, each containing 1 troy ounce (31.15 grams) of pure gold issued by the various world mints. The most popular coins are the South African Krugerrand, Canadian Maple Leaf, and U.S. American Eagle. Other gold bullion coins are available, including the Great Britain Sovereign, Australian Kangaroo Nugget, and Chinese Panda. Minimum orders are 10 coins, and commissions are 2 to 4 percent when buying and selling. These gold bullion coins have total liquidity worldwide.
Gold Stocks and Mutual Funds People usually do not invest in gold because it does not pay interest or dividends. Also, gold has been in a bear market for most of the past 25 years, government central banks have tons of stored bullion that they could sell (which would depress prices), and almost no one recommends gold as an investment.
Promoters (and that is the correct term because traders only make money when something sells) always tell investors that they are crazy not to participate in the “ongoing gold boom.” They are confident that economic conditions today are similar to the 1970s when gold prices moved from $38 to more than $800. Investors deeply worried about the future, instead of owning gold, often find it more convenient to put some of their assets in the cash of the world’s two safest currencies, the U.S. dollar and the euro.
Investors wanting to capitalize on world crises and rising gold prices may invest in the stocks of gold mining companies and in mutual funds that own gold companies. You may have heard of the Homestake Gold Mine, one of the early enterprises associated with the Gold Rush of 1876 in the northern Black Hills of what was then Dakota Territory. There are a handful of gold mining companies in the United States and dozens around the world. When there is turmoil in the world and people are fearful about the future, the prices of gold stocks rise, including gold mutual funds and gold exchange-traded funds (ETFs). Search Google for information, and you will find many scams.
Silver, Platinum, Palladium, Rhodium Some less popular metals also appeal to some investors. Silver, platinum, palladium, and rhodium are metals used industrially and occasionally in jewelry. The values of these metals rise and fall with changes in demand. An investor might reason that since palladium is used in auto production that when China’s demand for vehicles increases substantially the price of the metal will soar.
Precious Stones and Gems
Precious stones and gems, such as diamonds, sapphires, rubies, and emeralds, are also examples of high-risk investments. Investors purchase investment-grade gems as “loose gems” rather than as pieces of jewelry. Wholesale firms, not jewelers, sell the best-quality precious gems. The gem certification process may be touted as a science, but it is educated guesswork. Obtaining two assessments of a stone’s quality, particularly on stones of less than 1 carat, is likely to result in a variation of at least 10 percent. Novice investors often buy at retail and then wind up trying to sell at retail. This approach is the opposite of smart investing—that is, buying low and selling high. Sales commissions on precious stones are high, and reselling is very difficult. Losing 15 to 50 percent of one’s investment upon selling is common.
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