What Is a Collectible? Definition, Investing, Insurance and Types

What Is a Collectible?

A collectible refers to an item worth far more than it was initially sold for because of its rarity and/or popularity. A collectible's price usually depends on its condition and how many of the same items are available. Common collectible categories include fine art, antiques, toys, coins, comic books, and stamps. People who amass collectibles take a lot of time to collect them and usually store them where they will not be ruined. There is the risk, though, of deterioration and/or damage to collectibles over time.

Understanding Collectibles

As mentioned above, collectibles are items that usually fetch more money than their original value. Many collectibles can go for a pretty penny, especially if they're rare. The condition of a collectible also has a great deal to do with its price. Having a collectible in pristine condition means the price can go up. But if an item deteriorates over time, there's probably a good chance it won't be worth much—if anything at all.

Collectibles aren't as common or as great an investment as marketers would have you believe. If the product is still in production, the company eventually sees the market signal and produces more to supply the market. 

The store of value that makes a collectible usually doesn't come into play for many years, and it never comes at all for the vast majority of items. As the number of a particular product dwindles through attrition after its production run is over, some items become collectible due to their relative scarcity. 

The term collectible is sometimes applied to new items that are mass-produced and currently for sale. This is a marketing gimmick used to stoke consumer demand. Items currently for sale may run into supply issues that drive up the price asked for by resellers, but this is a different phenomenon from what drives the value of true collectibles.

How to Insure Collectibles

For those who own collectibles, it may be wise to purchase collectibles insurance. These insurance policies protect your collection from accidental breakage, theft, flood, and other types of loss. While such protection is critical for priceless items, your collection does not need to be worth millions to be worth insuring.

Several insurance providers offer add-on collectibles coverage to existing homeowners' policies. Generally speaking, collectibles insurance is relatively inexpensive, but the cost varies depending on the value of your collection.

Collectibles vs. Antiques

People often use the terms collectible and antique interchangeably. It's important to note that there is a distinct difference between the two. While all antiques may be collectibles, not all are antiques. That's because collectibles don't necessarily have to be old to be worth money. An antique is something people collect because of its age. Antiques may include furniture, art, knick-knacks, jewelry, and other objects.

Some antiques can be worth a lot of money. Rare and authentic antiques in high demand may come at a high cost. But other antiques may not be worth much other than sentimental value. For example, a piece of furniture passed down from generation to generation within a family may be valuable for emotional reasons but doesn't necessarily have a high monetary value.

Advantages and Disadvantages of Collectibles

The biggest benefit of investing in collectibles is purchasing items that excite you.

Advantages

• Whether it's sports memorabilia, antiques, comic books, fine art, high-end watches or model trains, people generally get into specific collectibles as a hobby they're passionate about rather than wanting to make money.
• Adding collectibles as an asset class might make sense for investors who want to further diversify their holdings.
• While you shouldn't expect it, collectibles have the potential to appreciate in value over time.

Disadvantages

• Investing in collectibles is fraught with risk, including the potential to deteriorate over time or be damaged.
• Beauty is in the eye of the beholder with collectibles as they don't generate any dividend income, so specific markets can crash just as quickly as they can rise.
• Lack of liquidity is also a concern with collectibles, as are high transaction fees, handling, and storage costs.
• Counterfeiting is a significant problem in any collectible niche.

Examples of Collectibles

There are genuine collectibles that are extremely valuable, namely trading cards and stamps. The most valuable collectibles in the world include the T206 Honus Wagner baseball card issued by the American Tobacco Company in 1909. Honus Wagner cards almost always sell for over $1 million if they are in good condition. In August 2022, the card sold for a new record of $7.25 million, which is an impressive haul for a card that was stuffed in cigarette packs as a gift.

Another example is the Treskilling Yellow. This is a misprinted Swedish postage stamp that sold for somewhere around $2.3 million in 2010.

Pop culture icons often end up as collectibles that appreciate over time. Rare comic books featuring Spiderman, the Hulk, and the Fantastic Four have joined stamps and baseball cards as collectibles. It is difficult to predict what the next million-dollar collectible will be, so you or your estate might get lucky—just don't bank on it paying for your retirement. But feel free to hang on to the stuff you love and hold dear.

A good example of a mass-produced item being marketed as a collectible can be found in the Beanie Baby fad of the 1990s. Ty, the product's manufacturer, produced hundreds of small plush toys with a floppy, bean bag-like feel. Consumers went crazy over them, believing they would become valuable one day. Hard-to-find limited editions became valuable when they were released due to resellers snapping up the refreshed stock. However, most of the plush toys were so widely owned that they never became valuable, becoming garage sale castoffs instead, although a few became worth money to some collectors.

The table below highlights some of the other most expensive collectibles in their categories.

The Bottom Line

The best way to start investing in collectibles is to choose collectibles that excite you and that you're passionate about. Then, do as best as you can to only buy from reputable dealers and sellers with a track record of good reviews. Finally, be sure to start small.