Whether you’re trading stocks, flipping houses, or playing with crypto, the goal remains one–to buy at a lower price, and sell at a higher one to make a profit.
However, there is an asset class that trades at a higher-than-market price by default. Such assets created one of the fastest-growing markets in the world, with a 19.2% CAGR. The collectibles market size is expected to surpass the $1trillion evaluation by 2031.
I’m talking about the collectible market, one that becomes more and more lucrative and thus more attractive to retail investors.
In this blog post, I’ll guide you through the ins and outs of the collectibles market, and share my experience looking for a true collectible market meaning.
What is a Collectibles Market?
While there is a multitude of assets that can be considered collectibles, if you ask a person on the street about the collectible market definition, there is a solid chance of hearing about the following types of assets:
- Sports & playing cards
- NFTs (if you catch someone younger)
While they will be right, not all items from this list will be considered collectibles. In addition, there are assets like watches, wine & liquor, and even cars that also have to be added to that list.
So what is a collectible market and how the collectibles market works?
First of all, let’s define a collectible:
A collectible is an item sought after by collectors
There are two key criteria that determine the value of collectibles and create the collectible market:
- Limited supply. Scarcity contributed to the exclusivity of the asset, and thus increases its value for investors and collectors alike. Sometimes, scarcity is created artificially. But in most cases with collectibles, scarcity creates itself, as the amount of assets in perfect condition decreases over time.
- Higher-than-market price. Due to the limited supply and high demand for collectibles, they tend to trade at prices higher than they were initially purchased for. Of course, the condition of the item will have to be near perfect to be traded at the highest price, but even items with slight traces of wear can rarely be found below MSRP.
So why would anyone pay more for a watch, a wine bottle, or even a playing card? Let’s explore these 3 key reasons to purchase collectibles:
Acquiring unique items to solidify one’s social status and being ‘unlike others’ is rooted deep within human beings. The ability to procure the rarest assets to claim as yours will show the rest of your community that they are not on your level.
This is the reason why Rolex watches are so expensive–the waitlist to get a watch on the primary market can put you in line for the next few years. That’s why most Rolex fans agree to pay 2x or even 3x higher than market value to buy the watch on a secondary market.
On the other hand, Hermes, the manufacturer of Birkin bags, has made ot nigh impossible to acquire one of their leather accessories. Thus, they made every lady who carries a Hermes Birkin bag, one of the very few humans who have an opportunity to do so.
Exclusive status attracts better business partners, gives you access to a limited circle of like-minded people, and impresses your ego–that’s why people are ready to pay enormous amounts of money to purchase popular collectibles.
Passion for collecting
In most cases, we buy collectibles because they carry emotional, rather than monetary, value. People who have made it their hobby to collect various assets will go to various lengths to obtain a specific asset, only to make their collection more complete than it was yesterday.
While it can be costly to maintain some assets in ‘mint’ condition, the value of such collections tends to increase exponentially with every year, and with every asset added to the collection. Not many true collectors will be ready to sell their prized possessions, though, so be ready to spend quite a bit of time trying to find someone to buy from.
However, if you become the owner of a rare bottle of whiskey or wine, or even a Rolex ‘Hulk’ Submariner (which was discontinued in 2020), finding the right buyer won’t keep you waiting for too long.
Diversification of investment portfolio
Smart investors are aware of the risks of putting all eggs into one basket and tend to explore the collectibles market and allocate 5-10% of their portfolio value for collectibles. Investing in collectibles is a great hedge against inflation, and the value of most collectible assets is in no way correlated with traditional markets.
For many investors, having art, classic cards, or a few Rolex watches helped them maintain a stable level of their portfolio value in 2022 when stocks and crypto–the most popular markets of today–took a tumble and started dipping towards the recession and the so-called “crypto winter”.
If you know how to do market research and can determine the assets worth investing in, the collectibles market size won’t leave you without an opportunity to make both short- and long-term profits.
How the collectibles market works
More often than not, you will have to work with intermediaries when buying or selling on the collectibles market. It can be an auction house, a secondary store, or just a private authenticator–someone who will guarantee that the collectible of interest is authentic, in proper condition, and is not over- or underpriced.
Of course, each intermediary will work for a fee. While in some cases, such as with the stores, the markup is already included in the cost of the asset, in other organizations, such as auction houses, the buying side will have to pay the buyer’s premium to cover the intermediary’s services.
Other than that, the structure of the collectibles market is akin to the traditional markets. Especially with the emergence of fractional investment platforms, the flow is very similar to that of trading stocks.
Here’s how the collectible market works in terms of such platforms:
Sourcing & verification
The platform takes the responsibility of finding and acquiring the assets, and then verifies, insures, and stores them in a secure vault before the item can be listed on the marketplace.
Sometimes, the platform will act as a consignor, where the asset owner will list their collectible on the platform for a small fee. This helps the fractional ownership platform to diversify the assets available to its users while also attracting new people to the collectibles market.
As soon as the asset is stored safely away, its value is divided into equal fractions–pieces of the asset’s value. The amount of fractions is recorded on the blockchain and will never change in order to provide fair trading opportunities for investors.
The asset’s fractions are then auctioned off on the platform. The biggest bids will win and the fractions will be distributed among the buyers accordingly. Each new owner will receive an NFT as proof of ownership, where the number of fractions, buyer’s data, and other important information will be securely stored.
Note that these non-fungible tokens represent ownership rights to the assets listed on specific platforms. Thus, buying and selling them on a third-party NFT market can be considered fraudulent behavior. We do not recommend buying NFTs for the Investables assets on other platforms or marketplaces.
Full ownership over assets
There are two ways to claim full ownership over the assets listed on fractional investment platforms:
1. Use the buy-out option and pay the full price for the collectible before it gets auctioned off.
2. Gradually buy out the fractions of the asset until you become the owner of 100% of the fractions.
When you become the owner of 100% of the collection, you can either continue trading the fractions and try to profit from your investment. Or you can redeem the physical asset in exchange for burning your NFTs. In this case, the asset will be taken off the platform, and the physical item will be delivered to your doorstep.
So what does collectible market mean? It is a never-ending process of finding, buying, storing, and selling valuable physical assets that tend to have a high emotional value to collectors and investors.
The passion for exclusive collectibles was mostly reserved for high-end society and unavailable to average retail investors. However, with the development of technology and updates in regulations, you can now begin your collectible journey as a fractional investor.
And using the Investables platform is the best way to do that!
Explore our trending collections with the most popular exclusive collectibles and start building your alternative asset portfolio with as little as $50. All the while, the asset that you start investing in will be securely stored and waiting for you to become its full owner and claim the prize you have so passionately invested in!
Frequently Asked Questions
What is the collectibles market and how it works?
A collectibles market definition is the process of finding, buying, storing, and selling valuable physical assets that are considered collectibles. Such assets are hard to come by and are usually traded above market price, which makes them a very lucrative investment opportunity.
Do collectibles have a big market size?
Yes! The collectible market has a lot of potential, and continues to grow in size. In fact, it is expected to surpass the $1 trillion mark in the coming 10 years. That’s why it is becoming a very attractive way to invest your money for long-term profit.
How can I make a profit from investing in the collectible market?
The best way to profit from investing in collectibles is to acquire assets that you feel passionate about and then finding like-minded collectors to sell your assets to. Look for investments with a proven price appreciation history and brands that specialize in creating exclusive collectible assets.