Many online investment startups now specialize in acquiring high-priced collectibles that only millionaires can afford, then allow small investors to buy shares in those collectibles, ranging from fine artwork and sports memorabilia to rare comic books and historical documents. Demand for collectibles has surged during the pandemic as people stuck at home and flush with cash make investments they feel more passionate about than plain-vanilla stocks and bonds.
Advantages of buying fractional shares: Prices for collectibles have little correlation with the stock market’s movements so they can act as useful—albeit unusual—alternative assets to diversify your portfolio. Investing in the right collectible also can yield explosive profits when it’s eventually sold at auction or to a private collector. Last year, thousands of investors paid $50 per share for a $140,000 vintage copy of Nintendo’s Super Mario Bros. videogame. It sold this past August for $2 million, or about $667 per share.
Firms that offer fractional investing are regulated by the SEC, and they make collectible investing as easy as trading stocks online at Fidelity or Robinhood.
But it’s not right for everyone—collectibles can take a long time to sell, tying up your money for years. And they don’t generate earnings or dividends as stocks do, so they can be highrisk, unpredictable investments.
To help you decide what’s right for you and how to profit from fractional investing, Bottom Line Personal spoke to collectibles investment expert Michael Fox-Rabinovitz, CFA…
HOW IT WORKS
Online collectible firms typically purchase items ranging in price from $10,000 to more than $5 million, often relying on software algorithms and historical databases of sales to try to outsmart the market and find collectibles that will have the best returns.
A set number of fractional shares, usually priced at $10 or $25 per share, are registered with the SEC. The firm holds an initial public offering (IPO) online. To invest, you download the company’s app, open an account, then wire money from your bank to fund your account and purchase fractional shares of the collectible. You can view detailed descriptions of the collectibles through the app, including prices, number of shares offered, comparable asset value and certificates of authenticity and other documents.
After the IPO shares are all sold and following the 90-day SEC-mandated lock-up period, you can buy or sell shares on the secondary market through a trading platform on the firm’s website.
The investment firm insures and physically stores your Monet painting or Lamborghini. Some firms take a cut of the eventual profits once the collectible is sold. Others take their fee as a percentage of the IPO and/or charge investors an ongoing fee. Most firms aim to hold the collectibles for five years or longer. However, if a majority of the shareholders agree, they can be sold at any time after the SEC holding period.
Caveats for investors…
Keep investments to 5% or less of your overall portfolio. Spread your bets around instead of focusing on a single item. Since prices for individual fractional shares tend to be low, put money in multiple baseball trading cards or different pieces of artwork, depending on your interests.
Plan to hold your shares long term. Technically, you don’t have to wait for a collectible to be sold in order to cash in. You can buy or sell fractional shares on the website of the firm that owns the collectible. But this is a relatively tiny secondary market, so the price you get on your shares may not be desirable.
BEST COLLECTIBLES FIRMS NOW
I look for areas of the collectibles market with the following characteristics—items with significant historical and/or cultural importance…extensive history of past sales and benchmark data to help determine market value…clear provenances of ownership with extensive documentation so you don’t have to worry about fakes. Areas that meet these criteria now include sports memorabilia, art, vintage comic books and videogames, and antique cars. Here are the best firms and what they specialize in…
Collectable (Collectable.com): Specialty: Sports memorabilia. The site offers more than 100 collectibles from baseball, basketball, golf and other sports. Why invest in sports memorabilia: Over the past decade, the PWCC, the largest trading-card marketplace in the world, reports that its 2500 index (PWCC 2500 Trading Card List), which tracks the increase in value of the 2,500 sports cards with the highest market value, rose almost 400% versus 197% for the S&P 500. What you can invest in…
1952 Jackie Robinson trading baseball card. The first Topps trading card issued of the immortal Brooklyn second baseman. IPO value: $540,000. Recent share price: $10.
Kareem Abdul-Jabbar’s NBA record basketball. Jabbar used this ball to score the final point of his career, number 38,387, the most in basketball history. IPO value: $375,000. Recent share price: $10.
Tiger Woods’s Titleist Te I3 putter. Woods used the club during his late 1990’s tournament wins. IPO value: $210,000. Recent share price: $34.
Masterworks (Masterworks.io): Specialty: About 60 works of fine art valued at more than $200 million and ranging from 19th-century Impressionists to contemporary artists. Why invest in art: Art collectors hold more than $1.7 trillion in assets. Although returns on art have underperformed the stock market in the past decade, from 2000 to 2021 the Artprice100 Index, which monitors auction prices of the works of 100 top artists, is expected to have increased 400%. What you can invest in…
Andy Warhol’s “1 Colored Marilyn (Reversal Series),” a dramatic 1979 oil-andsilkscreen ink portrait of Marilyn Monroe in swirls of turquoise and hot pink. IPO value: $1.82 million. Recent share price: $23.69.
Claude Monet’s “Coup de Vent,” an 1881 oil painting depicting the windswept Normandy coast on a summer’s day. IPO value: $6.4 million. Recent share price: $22.03.
Otis (WithOtis.com): Specialty: Vintage comic books. The site also sells shares in more than 100 small popculture collectibles including designer sneakers, toy action figures and vintage videogames. Why invest in comic books: The value of comic books has exploded in recent years driven by the prevalence of top-grossing movies featuring comic book superheroes. The Nostomania 500 Comic Book Stock Index, which measures the performance of 500 of the most desired and valuable comic books, was up nearly 800% over the past decade, including a more than 200% jump just this year. What you can invest in…
Avengers #1 comic book. One of the most sought-after items in comic book publishing, this premiere issue from Marvel was published in 1963. IPO value: $100,000. Recent share price: $100.
Pokémon Yellow. The 1999 videogame, published by Nintendo for the Game Boy player, helped kickstart one of the most popular franchises ever. IPO value: $79,500. Recent share price: $10.
Rally (RallyRD.com): Specialty: Antique cars. Rally offers Porsches, Ferraris and Ford Mustangs from the 1950s to the 2000s, some of which are on display at the firm’s New York City location. And now Rally is branching out into other unique collectibles. Why invest in vintage cars: The market has a history of stable returns and low volatility. Over the past decade, the Historical Automobile Group International (HAGI) Top Index, which tracks the value of 50 representative classic cars, has returned about 160%. What you can invest in…
1985 Ferrari Testarossa. 12-cylinder model with flying mirror and centerlock wheels. IPO value: $165,000. Recent share price: $82.50.
1955 Porsche 356 Speedster. One of just 193 cars in the “Speedster Blue” color with original engine and door panels. IPO value: $425,000. Recent share price: $212.50.
1976 Apple I Computer. Signed by Steve Wozniak who launched Apple that year with Steve Jobs. Fully restored and operational. IPO value: $825,000. Recent share price: $25.
1776 copy of the US Declaration of Independence. It’s one of about 20 privately owned large single-sheet copies distributed around the country in July 1776. IPO value: $2 million. Recent share price: $25.
Triceratops Prorsus Skull. Excavated in North Dakota in 1999, the dinosaur head has all three horns intact. Triceratops lived at the end of the Cretaceous era, 68 million years ago, in vast herds in western North America. IPO value: $285,000. Recent share price: $25.