Video: should you invest in collectibles or “emotional” equity?

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Professor Elroy Dimson

The latest FWB TV video is now up at FWB Securities Inc. and Findependence.TV.

Or click on the enigmatically titled “Millions of dollars lost in bike spokes as children.” That’s a reference to children using baseball or hockey cards a noise-makers on their bicycle wheels, oblivious to the possible future value of their Wayne Gretzky or Mickey Mantle rookie cards.

This video, featuring  Emeritus Professor of Finance Elroy Dimson of the London Business School, is a little more off the beaten track than the earlier ones focused on stocks and bonds. It looks at how “emotional assets” or “collectibles” (like art or stamp collecting)can generate some “psychic income” from the sheer pleasure of enjoying art on your walls or fine wines.

But surprisingly, historically the investment returns from collectives have also been more than decent. Going back between 1900 and 2012, collectibles have generated nominal annual returns of 6.4% and real (net of inflation) returns of 2.4%. That means they’ve actually beaten treasury bills and even such alleged inflation hedges as gold, silver or diamonds. However, they have not performed as well as equities.

The conclusion? If you enjoy the “psychic income” and pleasure of collectibles, that should be return enough but if you also make money from collecting things you’re interested, that should be considered a bonus.

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