COMMENT
Investing In Quality Junk

I once saw an ordinary-looking mule chest in an antique shop for sale at a jaw-dropping £1,000!

I have no idea whether it is really worth that much money, and that is why buying antiques can be perilous for all but the most experienced. Nevertheless, millions of people around the world collect antiques, not only because it can be a pleasurable pastime, but because antiques can be worthwhile investments.

In his book Superhobby Investing, Peter Temple cites a number of antiques that have returned 10% or more annually. For instance, a Victorian rocking horse that was sold for £250 in 1995 is valued at £650 today. Meanwhile, a Davenport jug is reckoned to have jumped from £65 to £200 in just ten years - a compound annual return of 12%.

Apart from chests and jugs, investors also love to collect clocks, silverware and ceramics. In fact, the number of collecting areas is so diverse that experts strongly advise collectors to specialise.

Perhaps the best piece of advice here is to pick an area that interests you. It is often said that what you collect is not really that important, but you must like it and want to learn as much about it as possible. Simply by being knowledgeable, you are less likely to get cheated in what is essentially an unregulated market where fakes are not unheard of.

It is also prudent to consider the physical space you have available at home. For those with modestly sized dwellings, it makes sense to focus on smaller antiques. These could include items such as snuff boxes, bone china plates and pocket watches.

Starting your antiques collection need not be that expensive. For example, it is possible to buy collectibles for as little as £50. But remember that just because something is old does not necessarily make it valuable. Moreover, age will not improve what was sub-standard to start with. Consequently, collectors should always buy the best within their budget because top-quality items tend to hold their value better even when markets are depressed.

Interestingly, seasoned antique investors are quick to admit that big killings are rare. That's because when you buy and sell antiques through dealers, your returns will be substantially reduced by buyers' premiums and sellers' commissions. Additionally, you may need more home insurance cover if your antiques are especially valuable. In this regard, it is always a good idea to have your antiques certified by a recognised appraiser. The upshot of all this is that you will need to keep your antiques for a good number of years merely to break even.

On a positive note, antiques can have an immediate and practical advantage over other types of investment. You may not get a regular stream of dividends as you would, say, with shares, but at least you can furnish you home with items that you like. And even if they don't appreciate in value you will hopefully enjoy using them.

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