Watch Out: Why Collectibles like Pokémon Cards and NFTs Could Turn Into Another Beanie Baby Bust

Investing in collectibles looks like it could be fun and maybe even financially rewarding. You buy items you think are rare and will rise in popularity and value, keep them safe, and eventually sell for a fat profit. Right?

Not quite. Every once in a while, someone makes a fortune from collectibles, whether it’s a Honus Wagner baseball card stuffed in a cigarette pack ($7.25 million) or a non-fungible token (NFT) consisting of white circles on a black background ($91.8 million). Experiencing a surge in popularity, some Pokémon trading cards have sold for over $400,000. But those stories become news for a simple reason—they’re extremely rare.

In reality, even making modest amounts of money on collectibles is a difficult game that takes time and at least a little bit of luck. And you could easily end up losing money.

The Risks of Investing in Collectibles

These alternative investments can be extremely risky and not all of the drawbacks are obvious. Here are some of the main pitfalls of investing in collectibles.

• Bargains are getting harder to find. With so much information online, the days of finding valuable items selling for next to nothing at a garage sale or flea market are increasingly rare.
• Counterfeiting. With high-value items, forgeries are common, and even appraisers miss some.
• Upfront costs. Even if you buy inexpensive collectibles, you need to store them. Some collectibles will be ruined if not kept in a certain environment, while others may require periodic maintenance. With expensive collectibles, in addition to the initial cost, you may want insurance.
• No income. Unlike stocks, bonds, and real estate, collectibles don’t generate income. The only way to make money is by selling at a profit, which may take decades or may never happen at all.
• Unpredictable price swings. All investments can be volatile, but collectibles are particularly so. This market is heavily influenced by trends and speculation about supply and demand. What was worth a fortune last month or last year may be worth very little next year or 10 years from now.
• Lack of liquidity. Finding a buyer willing to pay the desired price can be tricky.

Examples of Collectibles That Didn’t Hold Their Value

Beanie Babies

Beanie Babies, small stuffed animals, set off a frenzy in the late 1990s, with some of the rarest selling for thousands of dollars. Then the craze lifted, leaving some people holding onto tens of thousands of dollars worth of Beanie Babies whose price would only continue to fall in the future. Today, only the very rarest editions are worth serious money, and they still don’t command the same prices they did in the ’90s.

Antique Furniture 

It wasn’t too long ago that antique furniture—think Victorian or Georgian—was widely in demand and a solid investment. No longer. So-called “brown furniture” has plummeted in value this century, with many people struggling to give it away. With mid-century modern and contemporary pieces trending, brown antiques that once sold for $8,000 might fetch only $350 now.

NFTs

Two years after the hype over NFTs reached a peak, a 2023 report analyzed more than 73,000 NFT collections and found that 95% of them had become worthless. That meant an estimated 23 million people were “holding onto worthless investments.” Celebrity investors from Michael Jordan to Justin Bieber were caught in the downfall, suffering significant losses in the value of their digital collectibles.

The Bottom Line

Collectibles can be fun, but they aren’t always good investments. Isolated cases of these items selling for a fortune fill people’s heads with ideas that you can make more money doing this than buying stocks and bonds. Sadly, that’s seldom the case. Collectibles can be expensive to acquire and store, don’t generate income, are targeted by fraudsters, often lack liquidity, and swing wildly in valuation. Contrary to what you might have heard, it’s not easy to make money this way.