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Some Tips for Investing in Collectibles

Last update on: Feb 25 2020

When the economy isn’t doing well and people are worried about inflation, collectibles get a lot more attention. People are told that the collectibles are great investments, holding their value against inflation and conventional financial markets.

But you need to be very careful before venturing into collectibles. My first rule is that a collectible shouldn’t be considered an investment. It’s a hobby or interest from which you might make a profit if you do everything right. In any collectibles market you’re going up against people who are extremely well-versed in all the nuances of the field. They know that very small differences between items can make a big difference in value, and they know exactly what those differences are.

Even sharp, well-advised people can get taken in the collectibles market. Consider this story about an experienced, billionaire wine-collector who purchased a number of fake bottles of wine. The story has some good advice about how to approach a collectibles market.

Koch didn’t attend the auction but sent a wine consultant, acting on his behalf, to purchase 2,669 bottles of wine at a total cost of $3.7 million. In the process the connoisseur, who is #329 on the Forbes Billionaires list, added to his collection some fine trophy wines that lived up to the catalog’s billing of “the best of the best.” What he didn’t realize at the time was that he had also acquired 24 fakes.

One was a magnum (a 1.5-litre bottle) of 1921 Château Petrus for which Koch paid $29,500 at the Zachys auction. It turned out to be a deftly assembled fake, manufactured by a former perfumer who went into the wine counterfeiting business. His recipe: add fragrance and flavor to 1957 Château Petrus; re-bottle and re-cork; then top it off with a capsule and a custom-manufactured label. Voila!

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