Collectibles included in your managed investment portfolio

LGC

Just putting this out there. Do hobbyists include their collections in their managed investments portfolios; e.g., like including along with say their real estate, bonds and stocks etc?

I do include my collection and my advisor has applied a fairly decent “cost to sell” contra value against it. I understand materiality is a basis for inclusion/exclusion but wondering if anyone has anything to share?

jmmiller777

I tried to purchase an insurance rider on several hundred graded cards, but they wanted an appraisal for each card. I have all of the cards documented in a book with the pertinent info including price paid, but this wasn't enough. My Solution; buy a huge gun safe that has a high fire rating. I still wonder if plastic could survive even a moderate home fire.

Stone193

@LGC said:
Just putting this out there. Do hobbyists include their collections in their managed investments portfolios; e.g., like including along with say their real estate, bonds and stocks etc?

I do include my collection and my advisor has applied a fairly decent “cost to sell” contra value against it. I understand materiality is a basis for inclusion/exclusion but wondering if anyone has anything to share?

Definitely not.

If I put that kind of emotional/capital investment into a hobby?

If the collectibles market tanked?

Not only would I feel jaded that my investment went to hell? I'd also (and more importantly) be out a hobby.

akuracy503

How much are we talking here? Some guys have $100k invested in their bass fishing boat and angling hobby. It all depends on what kind of return you expect. Fishing is the gift that keeps on giving happiness. So are cards to some people.

balco758

I do not include my collection in retirement assets but I do have an insurance policy. I sleep better at night and process was rather easy.

LGC

@akuracy503 said:
How much are we talking here? Some guys have $100k invested in their bass fishing boat and angling hobby. It all depends on what kind of return you expect. Fishing is the gift that keeps on giving happiness. So are cards to some people.

I was not asking from a return perspective. More so from a retirement and estate planning perspective. My advisor wanted my list of assets to include what could be sources of retirement cash flow and possible inheritance assets for my benefactors. I was surprised at first but now my annual checkups includes a current valuation of my collection and an estimate of the timing of the eventual sales. So yes, if fishing assets fit as possible retirement income and estate assets.

Stone193

@LGC said:

@akuracy503 said:
How much are we talking here? Some guys have $100k invested in their bass fishing boat and angling hobby. It all depends on what kind of return you expect. Fishing is the gift that keeps on giving happiness. So are cards to some people.

I was not asking from a return perspective. More so from a retirement and estate planning perspective. My advisor wanted my list of assets to include what could be sources of retirement cash flow and possible inheritance assets for my benefactors. I was surprised at first but now my annual checkups includes a current valuation of my collection and an estimate of the timing of the eventual sales. So yes, if fishing assets fit as possible retirement income and estate assets.

If you include your collectibles as part of your capital asset for retirement?

You're gonna have to sell off stuff to defray cost of living.

Is that what you want?

I hopefully will not have to sell off anything in my collection. In fact, I plan to be buried with the stuff.

DBesse27

@jmmiller777 said:
I tried to purchase an insurance rider on several hundred graded cards, but they wanted an appraisal for each card. I have all of the cards documented in a book with the pertinent info including price paid, but this wasn't enough. My Solution; buy a huge gun safe that has a high fire rating. I still wonder if plastic could survive even a moderate home fire.

This was my experience as well. Wanted to insure a similar quantity of PSA cards. Had records for each card, what I had “in them” and also recent sales via VCP. They still said insufficient. So I gave up.

45isodd

PWCC has introduced a new service in which your PSA graded cards are stored in their climate controlled vault. You pay a one time entry fee of one and a half percent of The appraised value of your stored cards, and a half percent a year for the first two years to cover the insurance. By the third year, your premium is reduced to quarter percent a year of the appraised value of your collection. They will use an algorithm based on sales data to determine the value of your collection. If you want any of your cards back, you simply pay the shipping and the card is sent back to you. I’m not connected in any way with PWCC, just passing along the info I’ve been given.

Dpeck100

I think you could certainly include them in a total portfolio and I also see where one wouldn't want to. Every persons finances are different but I just can't see how at some point an amount of spending on a card(s) doesn't cross the threshold of an investment. Let's say your net worth is 100k. A $1,000 purchase is significant. At 500k maybe your threshold is 5k and up you go.

You may have all the best intentions with these purchases as a true hobbyist but that amount of money can alter your long run financial plans. I personally use a conservative number on valuing my collection and when figuring out where my net worth is apply that. There can be so much variance in the values of some cards that using the last sale is a terrible reporting tool. If you owned all PSA 9 86 Jordan's perhaps you do so but on cards where just a handful of people create the gap in value they can just as easily come crashing back down to earth.

Stone makes an excellent point that if you were to enter them into a financial planning software tool and use them towards funding a future goal you would need to sell them to create liquidity as they do not offer any cash flow. I have run modules on myself and I do not include them in that for this specific reason.

Where I do think you should consider it is if the value of your collection is greater than 15% you are probably getting too heavy into the amount of capital you have invested and perhaps you consider future resources be deployed into more traditional financial assets. The ultimate problem is they may out perform over a very long period of time but cards can crush these returns in the short term.

balco758

Check out Collect Insure. Easy process. I sleep well now.

brad31

@balco758 said:
Check out Collect Insure. Easy process. I sleep well now.

I have collect insure as well. Would love to hear from someone who actually had a claim with them to tell us their experience. I know a lot of us insure through them - they are great to deal with on getting a policy and changing limits. Just hope if the worst happens they make us whole.

Jimmy_Commonpants

@brad31 said:

@balco758 said:
Check out Collect Insure. Easy process. I sleep well now.

I have collect insure as well. Would love to hear from someone who actually had a claim with them to tell us their experience. I know a lot of us insure through them - they are great to deal with on getting a policy and changing limits. Just hope if the worst happens they make us whole.

Within your policy, how do they define "market value"? I see no explanation on their website.

LGC

@Dpeck100 said:
I think you could certainly include them in a total portfolio and I also see where one wouldn't want to. Every persons finances are different but I just can't see how at some point an amount of spending on a card(s) doesn't cross the threshold of an investment. Let's say your net worth is 100k. A $1,000 purchase is significant. At 500k maybe your threshold is 5k and up you go.

You may have all the best intentions with these purchases as a true hobbyist but that amount of money can alter your long run financial plans. I personally use a conservative number on valuing my collection and when figuring out where my net worth is apply that. There can be so much variance in the values of some cards that using the last sale is a terrible reporting tool. If you owned all PSA 9 86 Jordan's perhaps you do so but on cards where just a handful of people create the gap in value they can just as easily come crashing back down to earth.

Stone makes an excellent point that if you were to enter them into a financial planning software tool and use them towards funding a future goal you would need to sell them to create liquidity as they do not offer any cash flow. I have run modules on myself and I do not include them in that for this specific reason.

Where I do think you should consider it is if the value of your collection is greater than 15% you are probably getting too heavy into the amount of capital you have invested and perhaps you consider future resources be deployed into more traditional financial assets. The ultimate problem is they may out perform over a very long period of time but cards can crush these returns in the short term.

Thanks for this! I do agree about diversification if the collection becomes a significant portion. As to fair valuing, my advisor/planner has simply taken my spreadsheet and then takes a 40% cost to sell haircut. We both agree that we want to have a large conservative margin for error simply because of uncertainties for timing of liquidation, market movements, my biases and illiquidity for higher end stuff that sees little activity. Thanks again to all.

Stone193

then takes a 40% cost to sell haircut.

This is really smart.

What could make for a good discussion?

What will the collectibles industry look like in - say - 20 years?

I want to believe that there will always be people with a "collector gene."

Dpeck100

@LGC

I don't know if there is a perfect science but 40% seems very conservative if you have a broad mix of cards. It seems that using such a haircut might skew the data significantly and make your card choices look potentially worse than they are. Are you ahead of your cost basis using this scenario?

I couldn't begin to estimate the liquidation value of my collection because it could never been done with speed because I have so many of the same cards and such a large percentage of some of the higher graded cards in a few sets. If I used the "last sale" formula the number is probably 150% higher than the number I use so potentially a 60% discount for me across the board.

LGC

@Dpeck100 said:
@LGC

I don't know if there is a perfect science but 40% seems very conservative if you have a broad mix of cards. It seems that using such a haircut might skew the data significantly and make your card choices look potentially worse than they are. Are you ahead of your cost basis using this scenario?

I couldn't begin to estimate the liquidation value of my collection because it could never been done with speed because I have so many of the same cards and such a large percentage of some of the higher graded cards in a few sets. If I used the "last sale" formula the number is probably 150% higher than the number I use so potentially a 60% discount for me across the board.

@Dpeck100
Thanks for comments. I have a portion of my collection with zero cost base as I have graded cards that I have kept from my childhood and I am near 60. Agreed, it is near impossible to do this without significant effort that may be disproportionate to the benefit. I do think that for me the non-monetary benefit of collecting makes doing all this estate planning stuff moot, but my wife tells me all the time that she has little knowledge about monetizing my stuff and that I need to make it more transparent for her. Regards.

Dpeck100

@LGC

Now that you have disclosed your age I think it makes tons of sense. You are getting closer to the distribution phase of life and this will force you to decide if you would rather fund goals with cash or cards or a combination of both. Perhaps downsize your collection a little at a time to fund lifestyle.

With the recent tax changes there are fewer that will have an estate tax issue and those levels certainly could change in the future but for some of the hobbies true heavyweights their heirs will be forced to either liquidate cards or come up with some serious cash to pay the taxes. It is definitely wise to keep the wife informed and I think your advisor is giving you good advice.

45isodd

PWCC will also allow you to take out a short term loan based on the value of the cards in your vault inventory. A collectibles insurance policy will not provide that option.