Newb Question - Are firearms an investment?

[ApplePI]

Disclaimer:
This is admittedly unethical and immoral, which is why I separated this post from my case study. While I know index funds inherently contain sin stocks that profit on the death of others, this line of reasoning is, IMO, in a completely different realm. That said, I must ask:

Would anybody in the MMM community consider particular firearms and sought after ammunition to be an investment?

Anecdote: After I left the service (2012), I bought a number of firearms and stockpiled ammo like a tinfoil-hat wearer simply because that was my lifestyle then. (I have since worked hard to cull debt and curb expenses and no longer make these kinds of purchases.) Now, a series of tragedies happened and the value of these firearms increased. The ammunition also increased. These kinds of things are impossible to predict, and to make money requires "buying low and selling high," as if trying to "time the market." That said, I know the gun culture - if Hilary Clinton is elected president, AR-15 and AK-47 style firearms and the respective 5.56 ammunition and 7.62 ammunition will fly off the shelves. The prices will soar on the second-hand market and there will be money to be made. If there is another national tragedy, the same cycle occurs. I have seen it several times and the community is predictable.

As an example, my ~$750 S&W model AR-15 (a low end model) sold just months later for double. Had I purchased before the service, and four years went by, this was a 19% annual increase. This is absolutely cherry-picking data, but if I am convinced that our next president will send this community wild...

This is *immoral,* but purely from a pragmatic view, is it an *investment* ? Speculate, and risky if anything...

I am new to investing, but am genuinely curious to know whether or not this qualifies as a "strategy."

[Syonyk]

Not a bad area to diversify into, especially if you actually shoot.  Either you'll use the ammo, or you can flip it.

I do regret not going all in on AR-15 lowers in mid-2008.  I could have flipped them for about 400% at the end of the year. :/

[trailrated]

I wouldn't bet the farm on it, but if you got more than you needed personally and it wasn't a high percentage of your net worth invested in it I think you could come out ok. If everything is done legally (purchasing and selling, etc.) I see no moral issues.

[TheLazyMan]

I guess anything you can buy then sell for a higher price might be considered an investment. (However not necessarily a wise investment).

But, I don't think the IRS would consider it an investment worthy of favorable capital gains rates.

[Rural]

Firearms are tools. They may gain in sale price (not to be confused with actual value) over time in some cases, but they're no more an investment than a screwdriver or a table saw. You can potentially make some money buying and selling them, but that goes for, say, used clothing as well.

[chasesfish]

I agree with what the others said, they're somewhere between collectibles and tools.

The high dollar antique firearms go up and down in value based off other collector's capacity to purchase. Hunting rifles are tools and hold their value.  Modern handguns and AR-15 style guns have wild fluctuations based on political fears.

All that said, not an investment.

[KungfuRabbit]

Are you talking 2 guns to make spending money or 200 guns as your entire portfolio? 

Option A I'd say go for it. Option B is silly.

[MrMoogle]

It's speculation what you're proposing to do, not investing.  Typically guns depreciate, they don't increase their value (on average) over the long run like stocks do. 

[ShoulderThingThatGoesUp]

Not a good one, but there's nothing wrong with owning, buying, and selling them in my opinion.

[money beard]

I have a few firearms that have risen significantly in value over the last five years (Thanks Obama!)

I don't really consider it an investment, but more of a self-funding hobby.  I can go shoot my guns that are still cheap, using ammo that is still reasonably priced, by selling a couple boxes of ammo that has gotten more expensive.  Similarly, if I want a new handgun, I know I can sell one of my 5.56 rifles that has gone up significantly in value to fund that purchase (and then some)

Not an investment, but finding free/inexpensive/self funding hobbies is a good thing too.

And, I agree with you, if Hillary becomes prez a lot of this stuff will increase in value.  I have an adjustable stock sig 556 with a folding telescopic stock on it, original parts, not after market.  The stock folds up to where the thing can hang under a suit coat comfortably or will fit in a tennis racket case.  We bought it because the telescoping stock allows my wife to shoot it comfortably, but it has the added benefit of being one of the first scary rifles on the chopping block.  So, I know if we see any sort of future "assault weapon" ban, its value may go up 50% or so.

[Scandium]

Just curious since I don't follow these things; did Obama (well, congress really) pass any law restricting these guns or types of ammo, or was it just the fear that drove prices? I didn't think they actually passed anything? Similarly Mrs Clinton's ability to ban anything would depend on congress so not how much I'd bet on a price increase.

[gillstone]

Assuming you actually follow the law and don't sell the guns to someone who "Needs it right now because they might escape!" I don't see a moral issue.

The comparison to beanie babies is apt.  Your returns are based on a particular niche market deciding to lose their shit and sharply increase demand at some point in the future.  Adding to this is that the market for people who will panic-buy a semi-automatic is difficult to predict.  If they bought one back in '08 and a couple more every time an AR-15 killed some moviegoers or 2nd graders then they may have no more room in the bunker to buy five more in 2016 if Clinton is elected.  Also, demand may sharply drop if a Republican wins or buyers realize that Democrats don't have the numbers or will to enact actual gun control legislation.

Moving existing inventory isn't a bad idea, but trying to time purchase and sale around very unpredictable events is inherently risky.  While there is virtually no risk of regulatory capture of assets, you could end up buying at peak market and then be stuck with a small arsenal that can only be moved very slowly at cost or for a loss.

[GetItRight]

Nothing immoral or unethical about this at all. You have made an investment in your safety and the safety of your loved ones. If you see great morality and ethical bliss is being a passive victim, so be it, but despite what the liberals say you have a natural right to defend yourself and your property. As far as a financial investment I think it's likely firearms and ammo will hold a stable value. The only significant increases in value would be the result of external factors, such as unethical and immoral government restrictions on firearms... Any government restrictions on firearms are enforced at gunpoint with the government initiating the use of force. Think about that for a bit and it should help you see what is ethical and moral.

[Holyoak]

Absolutely!  I have a very large collection of mostly high grade military firearms from around the world, have a Curio and Relics federal firearms license, sold firearms professionally, and prices keep going up and up.  Condition means everything, and US weapons from WWII are extremely hot, as are German, Japanese, Fin...  Import banned guns are very costly to buy now; My IMI Uzi and Galil are such examples that only keep going up, up, up.  Even service rifles like my French MAS 49/56 that was dirt cheap a few years ago, has gone up tremendously...  I love my example that is very clean in the original 7.5x54 cal, non refurbished...  Same for my Russian SVT-40, Swede AG-42, Super rare FN-49 Argentine in 7.62x51...  WWII semi auto handguns are very hot too, from all sides.  Ever check the price of prime WWI/WWII 1911's or even 1917 revolvers, P-38's, Polish Radoms, wartime P35's, Type 14 Nambus?

I get to reload for them, shoot them, and enjoy their history, all the while their value continues to climb.  Sure, they are not the easiest thing to own if you move a lot, but the old world quality they all exude will never be seen again.  Even modern guns can skyrocket in value...  I know for a fact I can sell any of my 70's vintage 870 shotguns for way more than I paid, same for my Rem 700 rifles, and really make a killing on my Pre lock, pre MIM S&W revolvers.  Charles Daly/Miroku O/U shotguns appreciate, as do WW lever .22's, pre-64 model 70's, etc.  Very good quality from the past means good prices/great appreciation now.  Even good quality reloading gear keeps it's value and appreciates.  I know for a fact I could get at least $100 over what I paid for my Dillon 550B press from 1995, and get more than I paid for my RCBS presses from the 70's.  God I wish I had really stocked up on primers and shot to sell.

Good luck, and please PM me if you think I might help your situation

[Gone Fishing]

I am a shooting/hunting enthusiast and here are a few of my thoughts:

Guns are typically a decent store of value because they provide utility, as others have mentioned. If it works, it will always be worth something, unlike a baseball card or stuffed animal that can easily be worthless.  However, with the exception of a panic, they do not seem to appreciate much more than inflation, sometimes less.

The market for bolt action hunting rifles has been held back by cheaply made (but still very accurate) models from several manufacturers that contain a lot of plastic (known as polymer in the industry).  Likewise with semi-auto pistols.  Plastic revolvers are on the market now as well.  They may not feel as nice as an older, more expensive all steel model, but there is no arguing that most of them don't work well.  Plastic technology has permanently lowered the cost of manufacturing and low cost firearms which have flooded the market. It would not surprise me at all if low end AR's bottom out at around $500 if a republican is elected president.   

I paid $388 for my bolt action hunting rifle 15 years ago, a new one of the same model is running $488 now.  Deduct the few nicks and scratches from use, and I doubt I could get $400 out of it.

Stockpiling ammo is like stockpiling wine or booze, raiding the stache can be way too much fun, it takes up some amount of space, must have reasonable climate control, and is heavy/awkward to move.

Selling guns and ammo for top dollar (not at the pawn shop) may include meeting seedy characters in seedy places, large amounts of cash and/or gun broker fees and special shipping arrangements.

Rust, scratches, dents mean less value, so you either don't shoot it (a crime in itself) or baby it when you do (which is a PITA).

It is difficult to get your money out of accessories. 

Older unique, military, and no longer made firearms are probably as close to a buy and hold investment as you can come.  But these have experienced a significant runup over the past few years and haven't eased off like ARs have when the political pressure backed off.  There is also risk that the market will dry up when all the older vets that used them are gone.

Like many investments, you make your money when you buy, not when you sell.  The savvy firearm investor probably spends a ton of time educating themselves on the market, then scouring armslist and pawnshops for items that are underpriced for lack of information.  The internet has both helped and hurt here.

They do not pay dividends, you must liquidate your holdings to receive your profit.  Divorcing a shiny object that you have owned for years (and used to shoot your son's first buck, or your dad's last) can be difficult.

I enjoy my firearms and purchased (prior to MMM) what I think are high value options (including names like Taurus, Rossi, and Russian surplus), but I would never consider them as a true investment.     

[forummm]

You might be able to catch some price spikes here and there. It seems every time a Democratic president is elected, the manufacturers and their interest groups are able to gin up enough fear to cause people to hoard guns and ammo, causing prices to rise. But then nothing happens so the prices go back down. Otherwise it seems like it's just a depreciating asset.

[JLee]

It's speculation what you're proposing to do, not investing.  Typically guns depreciate, they don't increase their value (on average) over the long run like stocks do.

They hit a depreciation floor really fast, and some go way up. Try finding a 9mm KelTec Sub2000. :(

I should stock up on $80 lowers so I can make 200% the next time there's a panic.

[Syonyk]

Just curious since I don't follow these things; did Obama (well, congress really) pass any law restricting these guns or types of ammo, or was it just the fear that drove prices? I didn't think they actually passed anything? Similarly Mrs Clinton's ability to ban anything would depend on congress so not how much I'd bet on a price increase.

One of his campaign promises from his website was to renew the AWB without a sunset clause.  This followed him to the whitehouse site, and the eventually disappeared with no comment.

There was then an issue in 2009 where surplus military small arms brass (.223/5.56) was to be shreaded rather than sold, though this was resolved quickly enough.

Recently, BATFE went about trying to ban some steel core ammo that was explicitly legal according to their guidelines because it was suddenly "armor piercing" - despite having been explicitly legal for a long while.  They eventually backed down on that.

There's been a lot of sabre rattling, and especially early on, it looked like Obama with a Congress who thought he was the second coming would be able to push a lot through, but they apparently decided it wasn't worth the loss of political capital.

[MMMLurkerandAppreciator]

Do not invest in firearms!! Simply because of the legacy you will leave your loved ones should you pass away.

When my father passed away, he had over 70 firearms that were a part of his estate - some new, some antique, some family heirlooms (no idea which ones), various types of pistols, shotguns, rifles, ammo and more. You get the picture.

As both an heir and the executor of my father's estate, I would implore anyone reading this not to collect firearms as an investment. Apart from being a hobby, my father thought these guns were a great investment. he knew the story behind each one and had likely placed a (perhaps emotional) value on each.  Unfortunately, this information resided in his head. He was very proud of his collection. Not proud enough to document each firearm and provide information on each.

Guns present many challenges to an estate. A major challenge is safety. Although my father had a very large safe (so large, it altered the foundation of his house), I was finding loaded pistols in places like sock drawers! Selling this many firearms is not something that can be done at an estate sale - again due to safety concerns.

Many states require paperwork be completed upon sale of  a firearm. In some states, you can be held liable if a firearm is used in a crime and the proper paper work was not completed /the gun not registered to the new owner.

Even in gun-friendly Texas - and during deer season, no less - these firearms were (and still after 6 months, remain) difficult to unload (pardon the pun). I hired a broker and we are down to 6-8 guns remaining. He gets 20% of the sale price and most are selling for at, or below, cost (based on KBB data). These "investments" have been a ginormous pain the a$$.

To be clear: I am not anti-gun. I am anti-guns-as-an-investment.

[Retire-Canada]

I wouldn't dump my whole NW into guns and ammo, but you can't kill many zombies with Vanguard ETF shares!

-- Vik

[NorCal]

Not sure what's immoral here.  Morality has to do with actions taken, not a device.  Heck, I even shot at people in Iraq, and I consider that an incredibly moral thing to do (they were shooting mortars at civilians at the time) based on the circumstances.

You bought low and have the opportunity to sell high.  If you don't want to keep the firearms, this would be a good time to sell them.  If you want to keep them for personal reasons, keep them.

As investing goes, you can be lucky, or you can be good.  You were lucky, which means it's a good time to take money off the table.  Only fools count on luck a second time.

[ApplePI]

I've enjoyed reading everyone's response on this topic. I've attempting to broach it with colleagues who more or less shamed me, hence my need to acknowledge that I recognize the moral gray area here. It's great that this community allows open conversation of these kinds of things. That said, it seems there are quite a few opinions on the matter and I'll take it all into account. I certainly wont "bet the farm" on firearms, but if I make a few bucks on ones I already own, good on me :)

Thanks, everyone!

[Urizen]

To me, a firearm is a tool. I'd buy one for self-defense if I felt I needed it in my area. That is the limit of its investment. If I don't plan to defend myself with it, hunt, or shoot for fun, I don't plan to own one.

My father is a firearm collector and trader, and he sees them as an investment, certainly. But he barters with his and can flip them for a profit. I can't. To me, trying to flip a firearm is like trading to guess how a stock will rise or fall. I can't do it and so it isn't worth investing in (unless there were some sort of mutual fund equivalent in firearms I suppose). He does fine with his collection and sometimes earns a tidy profit, though I've long been interested in what his actual long-term ROI has been.

If you barter a lot or do a lot of personal trading, firearms may be a good investment. If you shoot, then they're obviously a fine investment.

[Syonyk]

He does fine with his collection and sometimes earns a tidy profit, though I've long been interested in what his actual long-term ROI has been.

Does he view them as an investment, or is it more of a self-funding hobby to him?  The second doesn't need to turn a profit, it just needs to pay for itsself.  And if you're good at it, and have time, you can get a lot of really nice stuff for not that much money. :)

[Urizen]

He does fine with his collection and sometimes earns a tidy profit, though I've long been interested in what his actual long-term ROI has been.

Does he view them as an investment, or is it more of a self-funding hobby to him?  The second doesn't need to turn a profit, it just needs to pay for itsself.  And if you're good at it, and have time, you can get a lot of really nice stuff for not that much money. :)

A little of both. Even if you took away the money-making aspect, he'd still do it because he honestly enjoys it. He likes guns, shooting, cleaning, trading, collecting. He just likes them. He has, though, told me that he does see firearms as an investment. He actually thinks of them as being a better investment than mutual funds or the like. He's the type who thinks the only worthwhile investments are physical things one can hold onto (gold standard type stuff).

But, like I said, he's mainly in it because he enjoys it.

[Syonyk]

Well, there's something to be said for things you physically possess...

It sounds like it's mostly a profitable hobby for him with some long term value store built in.  Nothing wrong with that!

[Scandium]

When you said immoral I thought you would "invest" in firearms to rob a bank. That I agree would be immoral, although potentially profitable..

[NoraLenderbee]

What do your colleagues think is immoral--the fact that they are guns (deadly weapons), or the fact that you would be making money from other people's fear?

I'm fairly anti-gun (I say this not to start a fight--I fully respect everyone's Second Amendment rights--but just to show that I'm the kind of person who isn't pro-gun). But I do not see anything wrong with buying guns legally, and selling them legally to buyers who meet whatever the requirements are in your state. If you sold them to drug dealers and bank robbers, I would have an issue with that.

I agree with other posters that you would be speculating, not investing.

[TimmyTightWad]

The conspiracy theorist in me almost thinks these little gun/ammo ban rumors are a planned economy/gun industry boost.
I bought a Ruger SR9c a couple of months after Sandy Hook, when there were rumors that such and such guns/ammo were going to be banned. I spent weeks researching and visiting stores before I finally gave in and paid $400+ for a compact automatic handgun.
Pre-Sandy Hook I'm sure I could have got the same gun at a gun show for $200 something. But yea, every gun store I went to was PACKED. I actually purchased my gun on a weekday during business hours and it was still packed to the point i had to wait over a hour to get checked out. I could get more into it but I'll just say I think the media/gun industry and the politicians they lobby definitely feed on certain fears and insecurities to get people to run to the gun shop while they count the money.

[Rural]

The conspiracy theorist in me almost thinks these little gun/ammo ban rumors are a planned economy/gun industry boost.

I'd think your conspiracy theories were silly if it weren't for the fact that I still (post 2012 election) can't get 22LR ammo at Walmart, or anywhere else except in small lots, broken up and marked up by an order of magnitude, stuck in a ziplock baggie, at the gun shops. The price spiked and then the gun shops starting giving a kickback to clerks at the Walmarts and similar stores, and it's been a marvelous racket on the most basic, low-power, cheap workhorse ammo ever since. I know it's happening here because I overheard one of the clerks bragging about it.