Investing in firearms, or guns, has become an increasingly popular alternative investment in recent years. With rising crime rates and civil unrest, more people are looking to guns as a way to protect themselves and their families. Additionally, many view guns as a valuable commodity whose price will continue to rise amid growing supply and demand imbalances. However, there are also numerous risks involved with investing in guns that must be considered. This article will provide an overview of the potential benefits and drawbacks of using guns as part of an investment portfolio.
Investing in guns can provide portfolio diversification and hedge against inflation
Adding guns to an investment portfolio can help diversify assets and provide a hedge against inflation or economic downturns. Guns have historically held their value well and even increased in price during times of inflation or market volatility. For example, gun prices surged during the financial crisis in 2008 and have continued climbing steadily since then. With major gun manufacturers limiting production quantities, supply shortages are also driving up prices and scarcity value. Gun collectors view firearms as an alternative store of value similar to art, antiques or precious metals. However, guns tend to be more liquid than other collectibles. Overall, allocating a small portion of a portfolio to guns and ammo can act as an uncorrelated asset class that zigzags independently from stocks and bonds.
Investing in antique or collectible firearms can generate high returns
Rather than buying brand new guns off the shelf, investing in antique, historic, or limited edition firearms can offer much higher return potential. Rare guns with desirable characteristics like engravings, precious materials or unique workmanship can appreciate rapidly in value over time. Iconic models like Colt Peacemakers, certain Mauser rifles, or beautifully engraved shotguns have sold for over $100,000 at auction. Even standard vintage military firearms like WWII-era M1 Garands that were priced under $200 in the 1960s now commonly sell for $1,500 or more. While prices are dictated by market demand, supply is fixed for antique guns. As with fine art, provenance and documentation proving authenticity create huge valuation premiums. Investors must beware of counterfeit or altered guns.
Proper storage is essential to preserve and protect gun investments
Guns require more careful storage and maintenance than most investments. Moisture, rust, and grime can quickly degrade the condition of a firearm. Gun safes and dehumidifiers are a must, along with keeping guns lightly oiled. Certain antique guns may also require hand-loading ammunition rather than using modern commercial ammo. Transporting guns across state lines introduces legal issues. In general, the risks of damage or theft are much higher with guns versus paper assets. Insurance can mitigate some of these concerns but adds to the carrying cost. Ultimately, the hands-on care and oversight of gun investments takes more time, effort and expenses compared to traditional securities.
Legal and regulatory risks associated with guns may reduce liquidity
The legal intricacies and regulatory oversight involved with owning, selling and transporting guns across jurisdictions pose challenges compared with most mainstream investments. Guns cannot be quickly bought or sold on regulated securities exchanges like shares of stock. Fewer potential buyers also limit liquidity and introduce middleman risks in private gun transactions. Ongoing legislative attempts to restrict gun ownership and sales represent a headwind as well. Tax implications are another consideration, as guns held as an investment are subject to the higher collectible capital gains tax rate versus the preferred stock long-term capital gains rate when profits are realized.
In summary, investing in guns has some attractive attributes like portfolio diversification, inflation hedging and high upside potential in certain collectible firearms. However, guns also carry unusual risks related to storage, maintenance, regulation and legalities that may constrain upside. Overall, guns merit selective consideration within an investment portfolio focused on real assets and alternative stores of value.