Owning beautiful things brings real pleasure. But a major new study reveals that pleasure has a price, and it's far higher than most collectors realise. There's a particular satisfaction in living among objects you've chosen with care. The painting that stops you mid-stride on a Tuesday morning. The vintage car that still makes you smile every time you open the garage. The case of wine you'll open at exactly the right moment, years from now. These things matter. The Knight Frank Wealth Report 2025 found that "joy of ownership" is the primary reason wealthy individuals buy luxury collectibles, ahead of investment potential in every world region except Asia. Collectors aren't deluded about their motives. They buy what they love because it enriches their lives. The trouble starts when enjoyment gets confused with financial returns. Are collectibles a good investment in a financial sense as well as an emotional one? That's worth examining honestly. Auction records make headlines. A neighbour's vintage Porsche doubles in value. A bottle bought for £200 sells for £2,000. The stories are real, and they feel like evidence. But they aren't the whole picture. Not even most of it. Nobody walks into a Michelin-starred restaurant expecting the meal to appreciate in value. The food is extraordinary. The experience is worth every penny. But it's consumption. You pay, you enjoy, and the money is gone. The bill, once you add the wine, the service charge, and the taxi home, is always larger than the menu price suggested. Collectibles work the same way. The enjoyment is genuine. And the bill is bigger than almost anyone expects.
Collectors sacrifice about 2.5% a year, and most don't know it
A forthcoming paper in the Financial Analysts Journal by Elroy Dimson of Cardiff Judge Business School, Kuntara Pukthuanthong and Blair Vorsatz puts a number on what that pleasure costs. Their study covers 110 years of returns across 13 categories of collectibles, from paintings and sculptures to wine, stamps, coins, classic cars and violins. It's the most comprehensive attempt yet to answer the question: are collectibles a good investment, or are collectors paying a hidden price for the privilege of ownership? The researchers call that hidden price the "emotional yield": the financial return collectors sacrifice for the non-financial pleasure of owning something they love. Collectors give up a median of 2.53% per year. The mean is 2.64%. Across 30 distinct return series, 24 showed positive emotional yields. In effect, collectors pay an annual fee for the privilege of enjoying what they own. That figure is almost certainly too low. The authors identify four reasons their estimate understates the true cost, including the fact that they treat investors as indifferent to risk, ignore transaction costs entirely, and make no adjustment for the superior liquidity of financial alternatives. The most striking finding is where the cost falls heaviest. Public-domain assets (fine art, jewellery), the things displayed and admired widely, carry an emotional yield of roughly 2.3%. Specialist-domain collectibles (wine, stamps, coins, classic cars), those appreciated within close-knit enthusiast communities, come in at around 0.5%. But private-domain collectibles (antique furniture, fine rugs), enjoyed quietly at home, carry an emotional yield of approximately 9.6%. The things nobody else sees are, financially, the most expensive to own. The principle extends beyond collectibles. The same framework, developed by Pastor, Stambaugh and Taylor (2021), predicts that any asset offering emotional satisfaction will carry lower financial returns in equilibrium.
Britain's collectibles market is weaker than the headlines suggest
The UK remains the world's second-largest art market, with an 18% share of global sales and approximately $10.5bn in transactions in 2025, according to the Art Basel/UBS Global Art Market Report. London is still a global auction hub. And wealthy Britons are active collectors: an Ecclesiastical survey of 250 UK high-net-worth individuals in 2023 found that 44% had bought jewellery or watches in the previous 12 months, 40% had bought paintings, and nearly four in ten had bought whisky or wine. Serious market. Serious buyers. But the recent numbers aren't kind. The Knight Frank Luxury Investment Index fell 3.3% in 2024, its second consecutive annual decline. Art dropped 18.3%. Wine fell 9.1%. Whisky lost 9.0%. The Liv-ex Fine Wine 100 was down 9.5% over two years, with prices at their lowest since 2020. Of 410 qualifying wine brands in the 2024 Liv-ex Power 100 ranking period, 343 registered negative price performance. Classic cars tell a similar story: Hagerty reports the Best of British Index at its lowest level since the index was created in 2018, with growth now concentrated in 1980s and 1990s modern classics rather than traditional blue-chip marques. So are collectibles a good investment over the longer term? Knight Frank's own data is instructive. A million dollars in its Luxury Investment Index in 2005 would have been worth $5.4m by end-2024. The same in the S&P 500 would have reached $5.0m. That comparison flatters collectibles. But Knight Frank itself notes that the past decade, and particularly the past five years, show consistently stronger returns from conventional financial assets. Even in one of the world's great dining cities, the economics of the kitchen haven't changed.
Are collectibles a good investment once you see the real bill?
The hammer price is the menu price. The real bill is considerably larger. At Sotheby's London, the buyer's premium (a mandatory charge on top of the hammer price) is now 28% on the first £1.5m, following a February 2026 adjustment. Christie's London charges 27% on the first £1m. Then VAT at 20% is applied to the premium itself, adding a further 5.4% to 5.6% to the total purchase cost. For a private collector, that VAT is non-recoverable. Gone. When you come to sell, major auction houses typically charge sellers a commission of around 10% on items estimated below £5m. VAT applies to that too. The arithmetic is sobering. A painting bought at auction for a hammer price of £100,000 costs £133,600 once the buyer's premium and VAT are added. Over the next decade, storage, insurance, and periodic valuation add roughly £20,000. Now suppose the market is kind: the painting sells ten years later for a hammer price of £150,000. That's 50% appreciation. A success, by most measures. But after the seller's commission of £15,000 and VAT of £3,000, net proceeds are £132,000. The collector has lost approximately £21,600. On a painting whose hammer price rose by half. To break even after all costs, the hammer price would need to increase by more than 70% over the decade: compound annual growth of roughly 5.5%. Many collectible categories don't clear that hurdle even in favourable conditions. Compare that with a financial alternative. The same £133,600 in a globally diversified index fund on a UK platform would carry all-in annual costs of approximately 0.22% to 0.45%. Over ten years, total cost of ownership: somewhere between £4,000 and £6,000. No buyer's premium. No seller's commission. No storage fees. No insurance. The gap isn't marginal. It's tens of thousands of pounds, and the academic literature consistently estimates round-trip collectibles transaction costs at 20% to 30% of the sale price. The service charge, the tax, and the corkage all add up.
Why collectors almost always overestimate their returns
We remember the extraordinary meals, not the forgettable ones. Collectors do the same with their returns, and four biases explain why. We overvalue what we own. Kahneman, Knetsch and Thaler (1990) established in the Journal of Political Economy that the minimum price sellers demand for an object typically exceeds what buyers will pay by a factor of two to three. Ownership inflates perceived value. Collectors anchor to what they believe a piece is worth, not what the market will pay. The longer they've held it, the wider the gap. We remember the wins and forget the losses. Gödker, Jiao and Smeets, in a study published in the Review of Financial Studies (2025), found that investors systematically over-remembered positive outcomes and under-remembered negative ones. The bias appeared only in investments people had actively chosen, not in those randomly assigned. Every shrewd purchase is stored in vivid detail. The three that lost value in a spare room? Largely forgotten. The headlines track the survivors. The Knight Frank Luxury Investment Index follows top-tier assets. A collector buying mid-range pieces isn't represented. Market commentary gravitates towards record-breaking sales. The graveyard of unsold lots and fading collections rarely makes the news. The industry sells stories, not statistics. Auction houses are expert narrators. Provenance, rarity, and cultural significance are woven into every catalogue entry and evening-sale presentation. Dealers, wine merchants, and classic car brokers frame purchases as shrewd acquisitions rather than pleasurable consumption. The narrative works because it aligns with what collectors already want to believe.
Fractional ownership: the bill without the meal
If collectibles aren't a reliable investment when you own and enjoy them, what about owning a fraction of something you'll never see? Platforms like Masterworks and Showpiece now offer UK investors the chance to buy shares in artworks and other collectibles. Own a piece of a Banksy without needing a few hundred thousand in spare capital. But the Dimson et al. research exposes a structural problem no marketing can solve. Collectibles are priced by and for people who enjoy owning them. That enjoyment suppresses the financial return. When a platform vaults an asset in a warehouse and sells fractional shares to investors who'll never see it, hang it, or drink it, the emotional yield vanishes. What remains is the financial return alone, which is structurally lower than what a conventional equity portfolio would deliver for comparable risk. As the researchers put it, these products offer the lower returns of a passion asset without the passion. Full restaurant prices for a meal someone else eats. The regulatory picture raises further questions. An Artquest legal analysis queried whether one UK platform's structure might constitute a collective investment scheme requiring FCA authorisation. The platform disputed this. Which? scrutinised another firm's art investment marketing in 2026 and noted the company itself stated it wasn't FCA-regulated. The FCA issued 2,240 warnings about unauthorised or potentially scam firms in 2024 alone. That doesn't mean every platform is fraudulent. But investors considering fractional collectibles should check the FCA register and understand they may have no recourse through the Financial Services Compensation Scheme if things go wrong.
Let your portfolio do the heavy lifting
None of this research says stop collecting. Buy the painting. Open the wine. Drive the car. The pleasure of ownership is real, measurable, and worth paying for. Life is too short to leave the cellar untouched and the car in storage. The mistake is expecting that pleasure to double as a retirement plan. A good financial plan draws a clear line between assets you own for enjoyment and assets you own for growth. Collectibles belong on the enjoyment side. They're consumption, not capital. Treating them as investments distorts your financial picture and creates an illusion of diversification that transaction costs and illiquidity quietly erode. So are collectibles a good investment? For your soul, absolutely. For your portfolio, the evidence says no. Evidence-based investing absorbs market risk through broad diversification, low costs, and disciplined rebalancing. It won't make a headline at Christie's. But it compounds reliably, year after year, without buyer's premiums, storage fees, or VAT on the service charge. And it frees you to enjoy your passions without needing them to perform. A proper financial plan accounts for this. Passion spending is planned, budgeted, and enjoyed without guilt, because the serious financial machinery is doing its job elsewhere. Understanding the distinction between what you love and what you rely on isn't a constraint. It's a liberation. Nobody walks into a great restaurant expecting dinner to fund their future. That doesn't make the meal any less worth having. Enjoy the things you treasure. Let your portfolio pick up the bill. If that approach makes sense to you, we should talk.
Resources
Dimson, E., Pukthuanthong, K., & Vorsatz, B. (2026). Emotional yields of collectibles. Financial Analysts Journal. Advance online publication Kahneman, D., Knetsch, J. L., & Thaler, R. H. (1990). Experimental tests of the endowment effect and the Coase theorem. Journal of Political Economy, 98(6) Gödker, K., Jiao, P., & Smeets, P. (2025). Investor memory. Review of Financial Studies Pastor, L., Stambaugh, R. F., & Taylor, L. A. (2021). Sustainable investing in equilibrium. Journal of Financial Economics, 142(2), 550-571
