Throughout history, people all over the globe have invested their money into collectibles, including art, classic cars, antiques, coin collections, fine wine, and jewelry. In today’s unpredictable economic climate, many investors are again considering these as investment strategy options.

Is this type of atypical investment right for you? What are the things you will need to consider before purchasing an art collection or other valuable item as an investment?

Benefits of investing in collectibles

Investing in valuables can be beneficial for some people, especially those who love what they are collecting. If you love art, investing in an art collection may be a great option—and you’ll get a great deal of enjoyment out of it. Also, most collectibles will not lose their value over time. In comparison, when you invest in a stock, you could see it dwindle to nothing in one day if the market crashes.

Cons of investing in collectibles

There are a few things to carefully consider if you do decide to invest in valuables. First, valuables are only going to yield a profit if they are in demand. If you are ready to invest you need to choose wisely. If you are an expert in the investment area, that’s great. If not, seek advice from someone who is.

Getting an appraisal before you buy is recommended. Make sure you are purchasing genuine products that are unique and will be in demand not only today but in the future. Finally, storing and insuring collectibles can be costly, and you will not receive any income on your investment until you sell.

Don’t forget insurance

If you do decide to invest in collectibles, make sure you get the right insurance to cover for loss, theft, and damage. Your homeowners insurance policy will most likely not cover the cost of collectibles—read the fine print very carefully and make sure you understand the terms. For example, if you collect classic cars, your insurance coverage may only allow so many miles driven per year in order to keep your coverage. Review your policy on an annual basis to make sure it is up to date with your current needs.

Consider the tax implications

Before investing in collectibles, make sure you understand the tax implications you could be facing down the road when you sell. You will most likely need to pay a capital gains tax on any profit you make. It is always a good idea to consult with a tax specialist before moving forward.

Is this investment strategy right for you?

Deciding whether or not to invest in collectibles is a personal decision that only you can make. Carefully look at the pros and cons before investing. A well-diversified portfolio requires care and attention. If you do decide to diversify your portfolio with valuables, choose wisely. Carefully research the items you plan to buy to ensure they are authentic and will not lose value over time.

Jeff Rose is a certified financial planner and author of the blogs Good Financial Cents and Soldier of Finance.  Learn more about his Roth IRA Movement that has inspired over 140 personal finance to educate young adults on the importance of saving.