Collections Build Wealth, Sometimes

In these days of low inflation, think of your coins or dolls as a hobby, not an investment

A thought for your pennies.

Dig through your loose change. If you've got an almost reddish, mint condition, 1955 Abraham Lincoln one cent piece with a "double die" mark - a doubled image of Old Abe - you're actually sitting on a cool $16,500.

The '55 Lincoln is one rare cent.

"There is strong demand for rare and semi-rare key date issues," such as coins that are required to complete a full set of Lincoln cents or Buffalo nickels, says Keith Zaner of Coin World, a newspaper for collectors.

Welcome to the esoteric world of collectibles: coins, precious metals, gems, paintings, antique dolls and furniture, and rare objects d'art.

While there is definitely money to be made in collectibles - such as finding a rare coin in mint condition - risks are high and returns are iffy.

Generally, coins currently sell at lower prices than five or 10 years ago, Mr. Zaner says.

The challenge with collectibles stems from one key factor: low inflation. Many collectibles move in tandem with inflation. In the late 1970s, for example, prices for antiques, paintings and other collectibles skyrocketed, reflecting double digit inflation.

The value of hard assets, such as coins, scoots upward when the value of stocks and bonds fall. They become financial alternatives to traditional investments.

Today, with inflation low, the best returns come from stocks and bonds. Over the years, stocks, bonds, and real estate have whipped exotic investments, including precious metals such as gold.

If you buy collectibles as investments, be prepared to pay a lot, without earning a lot.

An antique, for example, earns no interest or dividend payment. Some items, such as jewelry and coins, require special insurance coverage. You usually have to kick in storage costs for furs, gems or bullion.

Financial planners say most people should treat collecting as a hobby, not an investment. By acquiring quality collectibles, you might find that you have made a hefty profit over time. But consider such gains as a bonus, not a goal to your hobby.

Acquiring a fine collection can also be functional. "Ninety percent of the people who buy rare vintage fountain pens actually use them," says Max Davis, owner of Davis Vintage Collectibles, in Manhattan.

He also sells rare post cards - some from the early 1900s. Most cost about $2. You can enjoy collecting them, but you probably won't make a huge amount of money, Davis says.

That distinction doesn't hold true for all collectibles. Some do well: Toys, for example, from the 1940s, '50s, and '60s, and arts and crafts (such as pottery) from the early part of this century, says Connie Manno, arts director at Antiques & Collecting Magazine.

Precious metals are considered particularly speculative. Gold prices are well below the heady days of the late 1970s.

COLLECT FOR FUN ... AND PROFIT

* If you are planning to buy collectibles, these tips may help make your hobby both fun and profitable over time, says Connie Manno, art director of Antiques & Collecting Magazine:

1. Specialize in a field - whether it be coins or dolls - and also in a niche within that field that you truly enjoy.

2. Learn. Read about your hobby, and visit shows and auctions as an observer.

3. If you buy something, make sure you really like it. You will probably live with it for some time.

4. Don't rely on the word of a single dealer. Talk to several dealers and other experts.

5. Buy an item in the best condition possible.

6. Don't hesitate to display it in your living room; it's meant to be enjoyed.

7. Don't refurbish it unless you're an expert or you take it to an expert for restoration. Antique furniture, for example, might lose its original patina, or shine.