Lately, it seems that every time the market takes a dip, there are tons of articles and blogs talking about investing in alternative assets. It makes sense that people would want something tangible when everything else is uncertain. While gold, silver, and collectibles usually top this list, bibliophiles know the value of a rare book. So, why not turn your passion into a way to earn income? Although most people won’t make enough to retire, serious investors know the value of investing in rare books and have been doing so for years.
Why Are People Investing in Rare Books?
When people decide to invest in rare books, it usually stems from a love of the written word. Like most types of alternative assets, people look for tangible assets that can bring both pleasure and financial gain. Whether it’s fine wines, classic cars, art, antiques, or even toys, many investors find ways to incorporate their passion into their portfolios. And with the right pieces, these investments offer high returns when they appreciate.
However, you don’t need to be a bibliophile to start investing in rare books. One thing that makes them an attractive investment is that their value doesn’t depend on the performance of the stock market. Furthermore, the appreciating value tends to be more linear than other types of assets. Based on the returns from well-established collections, a rare book’s value typically doubles in value after 7 years, with normal inflation rates. And as long as it’s well cared for, it will retain its value for years to come
Where Can You Find Rare Books?
Unfortunately, you are not likely to find rare books at your local bookstore. You will have to start searching in more specialized markets such as auctions, estate sales, book fairs, and private dealers.
Auction houses have brokered the sales of some of the most valuable books ever sold. The greatest benefits of buying from reputable auction houses are that they often have access to extremely rare items, and their experts are able to authenticate the books. Plus, auctions will usually ensure that the rarest and most valuable books fetch top dollar for the seller.
Like art, book dealers can help you locate rare books. Therefore, it’s crucial to find someone you can trust to look out for items suitable to your taste and collection. Paying a dealer may also allow you to jump on opportunities before they become public knowledge.
Anytime you purchase something online, you should use caution. So to help you find better vendors, search for platforms dedicated to investing in rare books. These are credible platforms that carefully review each book and verify its authenticity. Not only is it convenient, but it also gives you greater access to books from around the world. And if you can’t afford to purchase it outright, you can also buy shares in valuable books.
12 Things to Know Before Investing in Rare Books
Based on the advice from expert collectors, here are 12 things you should know before you start investing in rare books.
1. Know what you are paying for.
With any investment, research everything before you buy. It may take a while to uncover the true origins of a book, which is why the majority of a dealer’s price is for their time to do this for you. However, you must do your research and know what you are paying for. This will help determine if a book is the real deal or prevent you from making an expensive mistake.
2. Only buy from reputable dealers.
The internet has changed many things about investing in books. If you buy online, it is much more difficult to authenticate and judge the quality of items. But generally speaking, a detailed description of the book and its condition are good indications that what they are selling is authentic. And if need be, you can always ask for additional photos of markings for further verification.
3. Condition is key.
Like all collectible items, books never can improve their condition. At best, they stay the same. At worst, they deteriorate with time. Even if you have a rare book, any damage and wear will affect its value.
4. There is no price guide or catalog to track their value.
One of the greatest drawbacks of these investments is the subjectivity of their value. Unfortunately, there is no price guide or catalog to tell you the exact value of the book you have. There is huge variability, even for books within the same edition.
Several factors besides quality also can add value such as age, rarity, desirability, inscriptions from the author, first editions, limited editions, or the inclusion of the dust cover. But ultimately, a book’s value is whatever the buyer is willing to pay.
5. Buy the best books you can afford.
Serious collectors will tell you not to waste time on low-quality books. Instead, buy the best ones that you can afford. Look for the best examples of an edition or title that you are interested in since they are worth significantly more.
6. Invest in books that you have an interest in.
Tracking down titles and research can become tedious. So, invest in books that interest you. If it is a labor of love and not only profit, it makes the task more enjoyable. And, it makes the successes that much sweeter.
7. You need to develop a personal network of people you can trust.
Collecting books can become highly competitive, especially for the most desirable titles and authors. Therefore, you should build a network of people you can trust to help you build your collection. This could include other collectors with different interests or specialized dealers. And, don’t forget to use the digital tools at your disposal to help you expand your network.
8. Don’t buy a valuable book if you aren’t prepared to care for it properly.
If you buy a rare book, it must be stored safely to protect it from fire and water damage. Unfortunately, if it isn’t properly cared for, the value will deteriorate with the condition. So, if you aren’t prepared to store it, don’t waste your money.
9. There are lower transaction costs if you go through a dealer.
Although auction houses handle the rarest and most valuable books, there are lower transaction fees when you use a private dealer. On average, auction houses take a commission of 35-45% which is shared between the buyer and the seller. However, a dealer’s commission is usually 15-30% so you will get a better return on your investment.
10. Like any valuable asset, consider getting insurance.
Any time you purchase an expensive asset, you should insure it. Sometimes, you can include coverage for rare books under your homeowners’ insurance. However, you can also obtain specialist insurance through reputable brokers. And, it’s not as expensive as you might think.
11. You can purchase fractional shares of valuable books.
Even if you don’t have enough funds to purchase a book, you can still purchase fractional shares. Although you won’t be able to display it in your home, this way of investing has less risk, lower costs, and eliminates the expense of storing it. This may be the best option if you are more interested in the financial gains than the asset.
12. Have a strategy before you start buying.
Lastly, have a strategy before you start investing. Don’t just buy books that look old or have a familiar title. There should be some sense of cohesion in your collection. Decide whether you want to focus on the most valuable books you can find, or if you would like to specialize by genre, author, classics, or generational favorites. This will help limit your search and help you find the titles you truly want.
Diversifying Your Portfolio
A good collection that is carefully curated by a knowledgeable collector has value in itself. However, rare books provide a low-risk investment that retains its value over time. Since their value is not correlated to the performance of the stock market, it offers greater diversification for your portfolio.
As Ernest Hemingway said, “There is no friend as loyal as a book.” And now, you can turn that loyalty into a valuable asset.
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