Mass production lowers the investment potential of collectibles: Internet Scambusters #759
Buying and curating memorabilia -- collectibles -- can be fun... but it doesn't always make a sound investment.
That's because modern-day memorabilia makers are mass-producing the stuff, as we explain in this week's issue.
We'll also tell you why collecting gold coins can leave you out of pocket unless you work with a reputable seller.
Now, here we go...
Don't Plan on Making Money from Modern Collectibles
Collectibles, series or issues of mainly small items from postage stamps to movie memorabilia, can be great fun.
But, as anyone who's jumped on the bandwagon hoping to make a fortune from recent issues has discovered, they're often not worth the paper or plastic they're made from.
Collectors are hoodwinked into thinking their new hobby is also a great investment, but that's only true if you've got the budget to buy old stuff. In the main, new items are made in such massive numbers that their potential for increasing in value is strictly limited.
It's not so much a scam but it's certainly a rip-off if producers encourage collectors to buy their merchandise in the belief it may have some long-term value.
Here's what's happened.
A few decades ago, most people didn't collect stuff like they do today. And if they did, it was because they liked the items, whether they were baseball or football cards, Star Wars figures or any other type of souvenir.
The result was that the products were either manufactured in small numbers or didn't survive once their owners grew out of the collecting fad.
Survival was an accidental process -- or intentional only if the owner was shrewd enough to see their potential.
Today's new "collectibles" are the product of what's known as merchandising -- a polite word for cashing in on the enthusiasm of customers.
So, for example, we have scores of different new sets of postage stamps issued each year but you can forget about them increasing in value unless you happen to stumble across ones with errors in them.
The same goes for movie memorabilia. Entertainment researcher Adam Wears notes that when the original Star Wars movies were made, the collectible craze hadn't started yet.
"Back then, merchandising was a niche affair," he writes on the offbeat entertainment website Cracked.com. "That's why we now give George Lucas credit for being savvy enough to collect his payday in merchandising rights.
"Toys weren't something that mainstream moviegoers cared about, which was reflected in the paltry volumes at which Star Wars toys were originally manufactured."
Things are so different today. Merchandise is actually promoted as being "collectible" and toys are turned out in the millions.
"You're simply not going to have the same levels of rarity that make the original toys so valuable," says Wear.
In the past, people bought toys to play with, discarding their boxes. Today, they're often bought and kept in pristine condition in their boxes. But their owners "are now being rewarded with the ignominy of having to sell them for less than they originally paid."
The only significant way to make money from collectibles is to buy pre-collectible era merchandise or modern items known to be rare -- such as one-off memorabilia or an autograph from someone who doesn't normally provide them.
If you don't have the budget for that or you don't know your stuff, then pursue the hobby for the pleasure it gives rather than for long-term growth in value!
(Read Wear's full report: Why Modern ‘Collectible’ Toys Are A Total Scam)
Another collectible area where expertise counts is the market for gold coins.
If you know what you're doing or have a trustworthy advisor, investing in gold can be highly profitable.
But the allure of the metal itself -- that is, ownership of bullion -- has led to a number of scams, partly because gold coins sometimes have a value in themselves beyond the worth of the metal content. That often makes them difficult to precisely value.
In a recent study, Doug Shadel, state director for AARP in Washington, and investigative journalism tutor Joe Eaton identified three steps to a gold coin scam.
First, the coins are deceptively marketed as being priced low -- close to dealer or wholesale costs.
This is followed by a bait-and-switch tactic in which potential buyers are then told they'd be better off buying higher-priced, older "collectible" coins because they'll increase in value faster.
If they fall for this, when they try to sell their coins they discover they've paid significantly over the odds for the coins, making it next to impossible to get their original investment back.
There are other scams of course -- including the sale of counterfeit coins.
The solution is to do your homework, both in terms of actual coin values and the company that is selling them.
As one coin expert told the pair of investigators, if the come-on suggests you can't lose by investing in the coins, "you have to ask yourself: Why are they selling it to me? Why aren't they hoarding it for themselves?"
Alert of the Week
Past students of online and campus college DeVry University could be in line for a refund after an agreement between the school and the Federal Trade Commission (FTC).
DeVry has agreed to pay $49 million for partial refunds for what the FTC labeled as "deceptive advertising."
Are you affected? Do you qualify? Check our the FTC's DeVry Refunds page to find out.
That's it for today -- we hope you enjoy your week!