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23: I buy toys that I like, but I'd like to think that 20 years from now they'll be worth more than I paid. How do I know if I'm buying toys that'll do that, aside from not letting kids chew on them? Isn't it worth anything to buy obscure figures that get cancelled right away?




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This article is from the Toys FAQ, by scottg10@ix.netcom.com (Scott Gordon) with numerous contributions by others.

23: I buy toys that I like, but I'd like to think that 20 years from now they'll be worth more than I paid. How do I know if I'm buying toys that'll do that, aside from not letting kids chew on them? Isn't it worth anything to buy obscure figures that get cancelled right away?

From TZ (TWZ101@psuvm.psu.edu):

"There are so many toys and figures being made and saved 'mint-in-
the-box' today, that virtually none of them will be worth much in
10-20 years. In fact, using experience as a guide, many will
probably DECLINE in price, as much of the current inflated prices
are due to speculation and new-item hype. Just look at how the
price of a Bane has dropped from $30 to $10-12, with no appreciable
new flood of figures on the market. Or Malebolgia from $50-70 to
$20-25. Or Clown, Overtkill, and Tremor, from $50-60 to
essentially retail price. Remember when Man-Bat was a $25-30 item
a couple of years ago? As Mr. Mint (Al Rosen) of baseball card
fame claims, anything marketed as a collectible usually ISN'T in
the long term.

The other things to factor in here are liquidity and relative
investment potential. Toys, like all collectables, are not
considered liquid investments in that it is relatively difficult to
dispose of them and convert their monetary value into other forms
of investment. If you own stocks, you can sell them at virtually
any time you want with just a phone call; if you want to pull money
out of your savings account in a bank, you can do that on short
notice too. This capital liquity allows you to shift investments
into the most profitable opportunities (those with the highest
percent return, balanced by risk factors) on very short notice.
Liquity is one important key to a good investment strategy.

Collectables, including toys, are terrible investments for three
reasons:

(1) They have very low liquidity. If you want to sell a toy, you
have to (a) find a buyer who wants the toy, and (b) settle upon
a mutually agreeable price. There is no standard pricing
scheme for toys, and you can't just walk into the local bank
and convert them into CDs or mutual fund shares. This involves
a considerable transaction cost in time & effort, reducing your
ability to deploy your money into more suitable investments
should the outlook for your toys' long-term profitability
become bleak. Toys prices also vary widely according to time,
region, and market trend, and it is entirely possible to have a
roomful of toys which simply NO ONE wants to buy from you at
any price. Ever try to get rid of 1980s-era baseball card
sets, especially 1986-89? These are essentially unsaleable
items, whose market value has dropped by 50% in then-year
terms, and even more so when inflation is taken into account,
in less than a decade. And you can't turn them in at the
supermarket for a box of Froot Loops, either! :-)

(2) To a much greater degree than "secure" investments like face-
value redeemable bonds or CDs, toys can depreciate considerably
with physical damage, and, as stated before the transaction
cost involved in speculating on them is considerable. Toy
value is highly dependent on condition, which can change if you
happen to leave them where the kids, dogs, flood water, or heat
damage can get at them, or if you accidentally drop your 12-
back Luke Skywalker, ding the corner of the card, and cut the
value by 20% in about a second and a half. Also, toys are
bulky items requiring considerable storage facilities and
maintenance (after all, it costs money to heat the room where
they're stored, you have to pay property taxes, etc. the larger
your house is, you might need a larger apartment to store them,
etc.) All this severely cuts into their profitability as
investments, as overall investment costs have to be taken into
account, not just sale value of the items in question. And if
you have particularly valuable items, you'll have to insure
them, an additional cost factor that cuts into your investment
return.

(3) Finally, any toy produced after 1985, and perhaps even 1980, is
really "new" (less than 15 years old), and not a proven long-
term secure investment. In essence, ANYONE who buys a toy now
with the expectation that 20 years down the line it will be
worth considerably more than one paid for it (remembering to
take into account inflation and transaction costs) is a
SPECULATOR, and speculation is an inherently risky business
proposition, with potentially high payoffs (had you bought that
case of 1985 POTF figures back in '85 when you had the
chance...) but also potentially high risks (anybody want some
Pac Man memorabilia or Donkey Kong stickers?). Hence, for the
conservative to moderate-risk investor, they must be considered
investments to be avoided.

The other factor to be taken into account is RELATIVE investment
potential. Simply put, relative to the profitability/risk ratios
of other widely available consumer investments like mutual funds,
toys are a bad way to invest your money. The possibility of
hitting a gold mine is far less than ending up with a money pit,
and, in a worst case scenario (no one but the Salvation Army will
take your old toys off your hands) you will have lost all your
money. It ranks up there with derivatives and risky land
speculation in terms of the potential for a financial disaster.
Despite what anyone might tell you, the vast majority of toys, even
"popular" ones, are virtually worthless compared to the money you
COULD have made systematically deploying your financial resources
in other sectors. Most comic stores make their bread and butter on
sales of new books, not because they stumble across copies of
Action #1 in attics every day, or even because Joe Schmoe sold them
a Phoenix figure for $8 that they turn around and sell for $12 or
$20. That's just simply not the way these businesses work."

 

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