"Paul Fraser knows collectibles like Warren Buffett knows stocks." - Steve Sjuggerud, DailyWealth.
My friend Steve made me blush when he said that. That's a big claim to live up to.
I'd quietly like to think it's true, but I've got competition: Warren Buffett also knows collectibles just as well as he knows his stocks.
Some of you may not know that one of the world's greatest investors is also a respected stamp collector.
 Warren Buffett and Barack Obama share collecting tips |
One of his first businesses was selling stamps for a profit - the hobby probably even fuelled his first investment.
So when it comes to investing in collectibles, we can learn a thing or two from the "Oracle of Omaha".
Many investors follow every move Buffett makes and hang on every word of advice he gives. Some will do whatever it takes simply to get five minutes of his time.
The collector looking to spend their money wisely can do a lot worse than to follow suit. Here's three of Warren Buffett's top investing tips:
1. Stick to what you know
The beauty of Buffett's investments are their simplicity. He's no maverick, instead preferring to place his money with household names such as Coca-Cola, American Express, Wells Fargo and the like.
These are companies that we all know, and have at least a basic understanding of their ins and outs - no baffling technology to be found here.
They are companies whose value is immediately apparent, and we can see their unwavering customer base all around.
The same applies when collecting.
A collector who places their money with well-established collectibles, the household names of the collecting world, is far more likely to see gains than those that buy into flash-in-the-pan sectors that they do not understand.
British stamps are a great example.
Britain gave rise to postage stamps, and in turn, stamp collecting. This is a market that's been rolling since the 1840s, and we're all familiar with at least the basic principles of stamp collecting.
Mention the words "Penny Black" and you're certain to get some comment from an armchair expert.
What's more, the top 250 Great Britain stamps have shown a compound annual growth rate of 13.6% over the past 10 years, with little fluctuation.
In turn, those that invested in booming Bordeaux wines in 2011 with little knowledge of the incredibly complex world of wine collecting paid prices that were unsustainable, and have seen values subject to a sharp correction.
Prices plummeted by 30% in 2012 and many are now drowning their sorrows.
2. Have a "forever" outlook
Warren Buffett once said that his ideal holding period for a stock was forever. He first bought into Coca-Cola back in the late 1980s and has not sold any of his stock to this day.
That's because the greatest rewards come to those who wait. During that time, Buffett has stuck with Coca-Cola through thick and thin (though admittedly more thick than thin), and has seen prices deviate heavily.
Yet he invested so long ago, when stocks were at such a low value, he can't help but make a gain. Patience has taught him not to sell up when times are bad, and when things are going well, they can only get better.
Collecting is driven by rarity, so the longer you hold onto your item the more chance you have of making a gain. Inevitably your piece will become more desirable to those that are waiting to own it, and they'll be prepared to pay more when the opportunity comes.
One rule of collecting is "buy what you love".
Buy what you are passionate about, and you'll never regret your purchase. Collectibles may not correlate with other stocks, but that doesn't mean you are immune from a price drop. If you love an item, you won't be fazed by those little unnerving moments.
Take the "Bordeaux bubble" I mentioned earlier, for example. Those that bought wine simply for the profit, rather than the taste, now have a cellar full of devalued assets.
However, those that are passionate about wine may not see great returns, but will surely be enjoying the fruits of their collection.
3. Understand timing
"Be fearful when others are greedy, and be greedy when others are fearful."
Buffett said that at the height of the Great Recession. And though most collectibles sectors fared well during the economic crisis, we can apply the same to collecting.
The classic car market is currently booming, with prices at an all-time high and record sales coming almost every month. Even better, it looks to remain strong, with more collectors joining the market every day.
But there's better value to be had elsewhere. Prices are already extremely high in this market, so gains will be slow and steady at best.
Collectibles investment is about spotting opportunities long in advance, and anniversaries are a perfect tool for doing so.
When the anniversary of a momentous occasion comes up, it refreshes interest in the collectibles relating to that event and brings new collectors to the market. Excitement builds as the date draws nearer and prices start to rise, continuing long after the date has passed.
Even better is the fact that these are fixed dates, so they're easily spotted. Find the undervalued market, spot a major upcoming anniversary and you could be on your way to potential gains rivalling Buffett's best buys.
And that's where I come in. Using my knowledge of collecting (I've been at it for over 35 years), Paul Fraser Collectibles can help you build the strongest portfolio of investment-grade collectibles possible.
Even the likes of Buffett and "Bond King" Bill Gross have advisors to keep them on track.
Call me on +44 (0) 117 933 9500 or email info@paulfrasercollectibles.com to discuss.
Or click here to see our investment portfolios for sale.
Thanks for reading,
Paul
