I have been reading in a few social networks, people talking about Hot Toys, Funkos, or Action figures in general as “investments”. As a professional in finance and a fellow collector, I can add my 2 cents for this conversation, without this becoming an academic paper : ) I will make an analogy with another exotic asset… wines and the super wines. Yes, wines, not wineries, which are definitely a type of investment.
First, a formal and less strict definition:
“A good definition of an investment is that it is deferred consumption. Any net outlay of cash made with the prospect of receiving future benefits might be considered an investment. So, investments can range from planting a tree to buying stocks to acquiring a college education.”CAIA Association
In plain English. You would delay eating an apple today as to have more than one apple in a certain point in the future. So, benefits are that the asset becomes more valuable and/or that it produces something of value. As for deferred consumption, wine fits well because if you drink it… well no more investment : ) What about action figures in which the act to consume is taking it out of the box? Let us think about it. The only way for something to be considered an investment instead of an expense is if it produces a stream of revenue or due to scarcity, thus higher resale value than when you bought it. Even if the cost to operate it is higher than the value, it will be a bad investment, but still an investment. In addition, being expensive is not a requirement for anything to be considered an investment. There can be something expensive, well engineered, a beautiful piece of art, but be an awfully bad “investment” and vice-versa.
Thus, the capability to produce a stream of revenue and/or scarcity are enough to define the drivers of value for something to be considered an investment.
n this characteristic, the super wines hold well (it is not considered institutional-type investment, but this is out of the scope of this piece.). If a wine is considered extraordinary from a certain vintage and that it is exceedingly difficult for its producer to recreate it… well, you have scarcity. Same things for paintings (not printed, but man made and one off). There is limited supply and if demand increases for it… you have a boom in price.
This seems not to be the case of action figures in which the companies can produce the item at the same quality or even higher in the future due to technological developments. So less demand for your collectibles. The producers can finish scarcity at any time. This is the case for action figures. Just see recently the case of the Hot Toys – Iron Man Mark 47.
As for demand, you need to be sure that current and future collectors for your brand/figure are going to be in higher numbers than when you buy any figure. This is difficult to predict as it depends on many variables. Historical evidence shows that they will simply shift for the newer models instead of old ones in the long term.
Having said all that, it seems that there are opportunities to buy and sell for a profit in 1-5 years’ time frame since the launch of some products without being a flipper that takes the opportunity of actual collectors (looking at you Hasbro with the SW Black Series!). I will expand this another time.
Fellow collectors, collect! Just do not do it with the intent to sell it for a profit in the long term. It will very likely not happen.