Guns serve as many things for many people. Many Americans own guns for self-defense. Others own them for hunting, for competition or simply to collect. Similarly, others look at guns, at least to some extent, as a store of wealth or a long-term investment of sorts. But really, are guns a good investment?
Consumer demand for guns has remained strong for generations. Occasionally, demand surges from strong to insane levels after political hacks and opportunists call for more gun control or outright bans. Meanwhile, even during economic downturns such as Obama’s eight years, demand for guns remains a bright spot.
However, just because a steady demand exists doesn’t automatically make guns a good investment strategy. For the most part, when considering financial opportunities, one can do much better than guns. However, if you consider other benefits of gun ownership, the answer becomes less clear cut.
Reasons not to look towards guns for solely investment purposes
Sooner or later, every gun owner tries to sell one or more guns. Like baseball cards, the value of any gun depends on what someone will pay for it. As long as someone will pay a fair price, great. Too often though, people sell guns when they need the money in a hurry. Generally speaking, that makes for a buyer’s market.
You know how that goes. You’ve got a loaded Springfield M1A (above) in good condition in the box listed at $1200. I have some $100 bills. Then the conversation goes something like this: “You might find someone to give you $1200 for that gun someday, but I’ll give you $600 for it right now.”
At the same time, if you “cash out” of your investment by selling it to a gun store, understand they have to turn a profit on your “investment.” For instance, they might only offer $600 on your loaded Springfield M1A in the hopes of turning it around for $1200 next week. Not only that, but if they pay you over $600, you might wind up with an IRS 1099 at the end of the year. Then you’ll have to count it as income and pay taxes on it as well, adding to your loss.
Similarly, trying to sell a gun at a gun show is a great way to attract countless low-ball offers.
On the other hand, if you take your gun to a friendly local gun store and put it up on consignment, you may actually bring home 75% or more of the fair market value. And if they can’t meet your reserve price, you can bring it back home.
I have sold guns on consignment before. In fact, my wife’s engagement stone lived a life as an HK-91 until the month after Newtown. Given the insane demand for modern sporting rifles at the time, my now-wife did very well as I recovered nearly half-again more than I had in the rifle and accessories. Even after paying consignment fees. Unfortunately, when spread over about twenty years, that 50% growth doesn’t look so impressive.
Selling a gun directly to another private party stands as about the only way to do well. But finding the right buyer can prove frustrating and sometimes difficult – and expensive. However, online gun auction sites will, for a fee, help you find buyers.
Lastly, if you look to earn regular income buying and selling guns without a license, watch out. A certain alphabet agency of the federal government that enforces regulations on alcohol, tobacco, firearms, explosives and really big fires may want to talk with you.
Aside from the market issues, one must consider legislative changes as well. Depending on where you live, you may face new legislation banning certain types of popular guns. If the new gun law grandfathers your old gun, you may win. If not, you lose.
Guns make sense as a store of wealth
We all know that gun ownership carries with it an intrinsic value all by itself. And while guns may not make the Forbes top ten list of investments, they do tend to retain their value if well maintained.
A friend of mine calls his collection of guns his “other” 401k. Jeff has acquired those guns as an insurance policy in case the world goes sideways. Regardless of your name or address, that Vanguard investment fund report will not protect anyone from a home invader like a gun will.
At the same time, Jeff also looks to his collection for its historical value. He likes to share his own appreciation of history with both his kid and friends. Obviously, he derives value in that as do plenty of other gun owners and collectors.
Jeff looks at guns mostly as a store of wealth. “Finding a gently used revolver or GLOCK at a bargain price beats maybe earning 1% in my savings account,” he once told me. He has his mutual funds for his investments.
I concur with his take on guns. While I’ve lost my fair share of firearms to tragic boating accidents over the years, I still have a few left. Unlike a car, boat or plane’s value, my guns’ value remain pretty close to steady year over year. Unlike real estate, I don’t have to pay property taxes on it. And unlike the stock market under Obama, I don’t worry about downturns and share prices.
Anyone looking to acquire guns as a pure investment might find the rare specimen in high demand. For instance, Elvis Presley’s Smith & Wesson Model 19-2 pictured at the top sold for $195,500. However, most of us will never find a needle like that in a haystack. Finding a good mutual fund, with or without the help of a financial advisor, proves a lot easier and will probably deliver a better return on investment. Especially for one’s IRA.
Instead, people like us, now and then, find a popular firearm in a mainstream caliber at a bargain price. Something like this will seldom serve as a poor place to park a few hundred bucks. As an illustration, Americans love America’s favorite rifle, the AR-15. Unlike a bar of silver or a gold coin, that AR just might save your life. Or a family member’s. Ditto for a GLOCK.
For those who think they can successfully invest in guns, have at it. But keep in mind that the quickest way to make $100,000 investing in guns is to start with $200,000.
Further reading
Some guns store value better than others. Here’s a list of some of the most collectible guns.
If you are storing significant value in your gun collection, here’s some straightforward advice about insuring your firearms.