A couple years ago, I bought a guitar for $30,000…

It was the most I’d ever paid for a guitar – by far. But I knew what I was doing… I know guitars.

And I know what big collectors are willing to pay for when it comes to collectibles. I’ll share that with you today.

Just over a year after I bought that guitar for $30,000, I sold it for over $70,000. Minus the dealer’s commission, I received around $60,000 – for a profit of around $30,000.

[ad#Google Adsense 336×280-IA]Making profits in collectibles is not as easy as I made it sound though…

It really does require hundreds of hours of becoming an expert in whatever that collectible is.

And being an expert isn’t enough… It is a minefield out there.

You have to follow certain rules, or you won’t make money.

Here are a few rules – from my guitar purchase and sale – that you can easily apply to any collectibles… from antique cars right down to thimbles:

1. The guitar I bought was in all-original condition. The rule of thumb is that refinished instruments are worth about half what original ones are. Collectibles in original condition – even if somewhat beaten-up – are typically worth much more than refinished ones.

2. This instrument I bought was top of the line for its day and very few were made. Collectibles are all about supply and demand. An important note here: Just because very few were made of something doesn’t make it valuable… What you need is way more demand than supply.

3. This instrument was from the 1930s – “the Golden Age” of the acoustic guitar. It is the most important era for acoustic guitars. Find your collectible’s Golden Era and stick to it.

4. Don’t be fooled by age – just because something is old doesn’t mean it’s valuable. Typewriters are old, for example… But they’re typically not worth much. Guitars from 1910 are typically worth less than guitars from the 1930s.

5. DON’T look for the “sleeper.” You’re better off buying what you know collectors want than trying to find the lower-priced “sleeper” from a nearby era, or trying to predict what the new fad will be in that market. Buy the Beatles. Don’t try to bet on The Human League.

6. Whenever collectibles start getting “up there” in price, commemoratives and replicas start to come out, typically at pretty high prices. To me, these replicas will never be particularly valuable. These are not the original thing (which is what big collectors want), and the makers of replicas can always make another run of commemoratives as long as they have demand.

If you want to make money in collectibles, follow these rules.

Don’t get me wrong here… I am not a snobby collector. I don’t live and die by these rules. I am a guitar player first and foremost, not a collector.

Just a couple nights ago, my colleague Brett Eversole (another avid guitar player) and I got to meet guitar legend Steve Vai… Here’s a picture of me with Steve Vai’s personal guitar, called EVO. And a picture of Brett, with the legend himself:

So I don’t care if a guitar has a replaced tuning peg… or if someone wrote their name and phone number on the back. If it’s not perfect, I can get a GREAT price on it, compared to the collector’s price. But I do this knowing I’m limiting my profit potential… I know that when I ignore ANY ONE of my rules, I am giving up essentially ALL my potential for real profits.

It is possible to make real money in collectibles… I made a $30,000 profit selling one guitar. But it is a long road…

You have to acquire a great deal of knowledge (which almost has to be a labor of love). And you can’t break any of the rules above – otherwise you’re limiting your ability to make any money at all, after expenses and dealer commissions.

It is doable… Become incredibly knowledgeable, follow the rules above, and you can succeed.

Good investing,

Steve

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Source: DailyWealth