One mistake that a lot of well intentioned people make when first investing in alternative assets is confusing fine art and antiques with pedestrian collectibles. Differentiating between the genuine asset class of art and antiques on the one hand and knick-knacks and collectibles on the other is vital considering that failing to do so can be a potentially very expensive error.
Art and antiques have a proven track record as investments, sometimes spanning not merely decades, but centuries. Collectibles, in contrast, usually quickly burst into the public consciousness and then flair out of existence just as quickly.
So what makes something a collectible instead of a legitimate antique? First, collectibles tend to be created solely, or primarily for the purpose of being sold directly to naive collectors.
Think of your Uncle Ned's "Champions of NASCAR" plates from the Franklin Mint. You may love your Uncle Ned dearly, but the sad fact is that his limited production-run plate "collection" has no real value, besides its vanishingly small utilitarian value as dinner plates. They were produced by the thousand and hold no allure for most NASCAR fans, much less the average person.
Compare this to something like the Hope Diamond. Many people may not know a lot about diamonds, but almost everybody has heard of the famous blue stone and the exciting lore surrounding it. And a lot of wealthy people - even those that don't normally spend much time thinking about diamonds - wouldn't mind owning such a renowned and beautiful gem.
Collectibles also have a tendency to be faddish. A great example of this is Beanie Babies. Do you remember those small, cute plush animals that everyone was stockpiling at the turn of the millennia? It doesn't make a whole lot of sense now, but everyone was absolutely convinced that these tiny lumps of brightly-colored fabric and synthetic beans were going to allow them to retire on the French Riviera. Once the insanity receded, the Beanie Baby fad dissipated with incredible speed, leaving tens of thousands of bitter "investors" with nothing but junk stuffed animals and regrets.
True antiques are real items that were created to be used by real people in real situations. Life isn't easy and that rule applies doubly to antiques. Actual antiques have been worn smooth, accidentally dropped, forgotten in basements and attics for years and generally abused in almost any way imaginable. As a result, it isn't surprising that relatively few survive today.
In contrast, it is a safe bet that almost every mass-produced collectible ever made is immediately squirreled away into a dresser drawer, display cabinet or hope chest. This ensures that, regardless of the size of a collectible's initial production run, the exact same number is still available today - and invariably in excellent condition too.
Collectibles are often made to commemorate well-known people or events. Why is this so? Because the marketing team behind the collectible knows these famous individuals and occurrences are a hook. They play upon the emotions of ignorant suckers who want to "own a piece of history". The only problem is that the collectible commemorating the event has no real connection to that history whatsoever.
Let's look at an example. What do you think most civil war buffs would rather own - a recent, mass-manufactured bronze medallion commemorating Confederate general Robert E. Lee, or his personal 1860s era officer's side-arm, complete with provenance? One of the items has a true, personal link to the famous man while the other is the mass-produced vision of a marketing maven with dollar signs in his eyes. Is it any surprise that the real antique is destined to appreciate far into the future, while the collectible will eventually find its way into the trash heap where it belongs?
