Every once in a while, otherwise sane people convince themselves that collectible objects are good financial investments. Sometimes they invest in long-run asset classes like stamps or art. Sometimes it’s ephemeral crazes, like Beanie Babies. One of the newest is non-fungible tokens, which are unique units of data stored on blockchains. I expect they will end up in the ephemeral category.

But all of these asset classes are bad investments from a financial perspective, whatever their boosters tell you.

Collectibles have a fundamental flaw: they don’t generate cashflow. In fact, after maintenance, storage, deterioration, and transaction costs, their cashflow is usually negative. That means that in the long run, they’ll consistently under-perform conventional assets like stocks and bonds.

Promoters work hard to confuse potential investors about this. They point to isolated examples of collectibles that produced outsized returns and suggest that you can enjoy those same returns. But most likely, you can’t.

You might justify owning some collectibles because it gives you joy to see them, providing a psychological return. That’s fine; if your collection brings you joy, keep it. It’s fine to have hobbies. But one shouldn’t delude oneself⁠—or worse, others⁠—into thinking that hobbies are good schemes for wealth-building.

Collectibles don’t generate cash flow like bonds or stocks. They can only make you money through appreciation. Perhaps that doesn’t sound like a big constraint. But it is, because in the long run, assets without cash flows cannot increase in value more than the economy as a whole. If something appreciates faster than the whole economy in the long run, it eventually eclipses the whole economy, which is impossible.

But stocks and bonds have a property that gets them around this problem. They can (and do!) get a total return that is larger than the economy-wide growth rate. They do this through interest payments, dividends, and buybacks. Suppose the economy as a whole grows at 5 percent annually. The stock market might also appreciate at 5 percent in terms of market capitalization, but also yield a 3 percent annual dividend, giving you an 8 percent return overall. This actually isn’t a hypothetical. It is pretty close to the real-life historical numbers. Stocks can achieve, and historically have achieved returns that are impossible without cash flow.

There’s a place for zero cash flow assets, and always will be. Some share of the economy will always be devoted to Picasso paintings, 1977 Kenner Star Wars figurines, or obscure 19th-century stamps. But that’s a limited pool of money and attention, and its value is bounded. If a new collectible becomes popular, it erodes the mindshare and the market share of at least some incumbents.

And as I mentioned earlier, collectibles usually have negative cash flow. You need to pay for storage to keep figurines or art or stamps pristine. Small items like baseball cards can easily be lost. Not even non-fungible tokens (NFTs), an entirely digital collectible, completely solve the depreciation and loss problem, because they have famously been lost or stolen.

It’s easy to imagine that you’re the sort of person who wouldn’t ever lose or damage valued items, so these critiques don’t apply to you. But the odds are you’re not.

Another big problem for collectibles is that the buying and selling process isn’t smooth. It’s a viper’s den of scamsters.

It’s also easy to imagine that you’re the sort of person who can navigate a web of scam transactions and bad information. But the odds are you’re not.

Even if you are, you’ll still have to go through a costly verification process to prove that what you’ve collected⁠—or what you’re about to collect⁠—is authentic. Often this needs to be proven and re-proven. The verification process will eat into your returns.

But those who promote collectibles work hard to make you forget the flaws. Let’s take an illustrative example: Masterworks, a company that allows people to buy partial shares of expensive artwork. The pitch reads “our mission is to democratize art investing, a $1.7T asset class.” And note that this is really just investing, not art enjoyment. You don’t get to have the art in your house.

They work overtime to sell the asset class.⁠ But