How investing in rare books can give your portfolio a boost

As geopolitical events shake equity markets, many investors are finding refuge in alternative investments.

Those seeking to diversify their portfolios may find attractive opportunities in rare and antiquarian books.

The market for such books has seen surging interest lately, racking up new sales records and clocking handsome returns.

In September, Christie’s auction house sold a pair of books by Agatha Christie and Arthur Conan Doyle for $63,968 and $226,555, respectively. Both books belonged to the late Rolling Stones drummer Charlie Watts.

October saw Sotheby’s host a series of auctions in New York City and London, comprising a rare book library, Bibliotheca Brookeriana, estimated to command over $25 million.

A couple of months before that, the earliest and most complete Hebrew Bible fetched a record-breaking $38.1 million at Sotheby’s, becoming the most valuable manuscript ever sold.

Global rare collectable books (including books, maps and manuscripts) at auction clocked $1.6 billion in 2022, comparable to the $1.15 billion revenue in 2021, when the market doubled in size from three years ago, according to rare books expert Bruce McKinney.

Aside from financial gains, investing in rare books is an engaging hobby that involves exciting experiences ranging from finding a timeless tome at a dusty bookstore to evaluating the collectible value of a book.

But before you rush to the nearest dealer, take a moment to grasp what makes books a sound investment.

Why invest in rare books?

People collect books for several reasons – some for scholarly pursuits, others are captivated by the allure of classic works, and some see them as a hedge against market volatility.

“Owning a book can connect you directly with the past in a way that is very satisfying,” says Ian Ehling, director of fine books and manuscripts at Bonhams, in New York.

People who buy rare books are usually doing it out of a passion for the material and a connection to history, says Christina Geiger, head of books and manuscripts department at Christie’s Americas.

Compared to some other pastimes, collecting books tends to yield attractive long-term returns, she adds.

For some people, it's about the excitement of searching and the joy of chancing upon a rare gem.

Former investment banker Sam Dogen came upon one such gem in 1991 in Isaac Asimov’s science fiction novel Foundation and Earth.

“I bought a first edition, first printing, signed copy of the book at a used books store for $40,” he says.

After Asimov died, the appeal of the book increased. That book, Mr Dogen says, is now worth over $1,000 and is the most valuable in his collection.

The advent of digital technology and e-books has also increased the rarity of paper versions.

“There has been a move towards digital books,” says Wendy Guerin, co-founder of Cookbook Village, an online store that specialises in collectable and vintage cookbooks.

“Many people assume print is of low interest and throw books away or give them to someone else who discards them, which leads to shrinking supply.”

What to consider

Like any category of collectables, the biggest question on every new entrant’s mind is where to start and what to consider.

Those who specialise in the field recommend starting slowly and not expecting instant riches.

Christie’s’ Ms Geiger suggests visiting libraries that showcase rare books from private collections and trying to learn more about them by talking to experts.

Another piece of advice for beginners is that they should explore antiquarian book fairs, trusted book dealers and auction houses.

Consider zeroing in on a specific genre. This could include exploring books from a particular historical era, first editions of popular literary works or seeking out copies bearing the authors’ inscriptions.

“Focusing on a niche genre will help an investor learn about the market and make smarter purchasing decisions,” Ms Guerin contends.

Pros and cons

Collecting books follows the basic investment mantra: grasp the fundamentals through research.

Gilded pages, a mildewed cover or the year of publication are no guarantee of collectable value.

“New collectors often equate the age of a book with its value, assuming the older the book, the higher the value, which is not the case,” Ms Guerin says.

She cautions against approaching “investing in rare books as a land grab, using scanners [apps and websites] to find ‘valuable’ books”.

An expensive book must possess rarity in the form of a unique flaw, fewer specimens or famous associations.

“Rarity along with special attributes increases value,” says Mr Dogen, creator of personal finance website Financial Samurai and author of Buy This Not That.

A rare book could also serve as a hedge against economic uncertainty and provide asset diversification from stocks and cryptocurrencies, Mr Dogen contends.

Experts like Ms Geiger caution that if you get into collecting rare books hoping for a financial windfall, you’re likely to be disappointed.

A con worth pointing out is, regardless of the subject's appeal, a true collector might not flip through and savour their acquisition since “even the smallest crease, bent corner or mark will lower the value of a book”, Mr Dogen warns.

What determines a book’s value

Key attributes that determine a book’s collectable value are condition, scarcity, author, edition, age, content and subject matter.

Imperfections such as damaged covers, missing dust jackets, ripped or dog-eared pages, mildew and stains are all value destroyers.

A close association with the writer, the earliest edition and first prints also plays into burnishing a book’s worth as a collectable.

“When we price a book, we take into consideration the author [is he or she of note?], the title [is this one of the better works?], the imprint and limitation [is this the first edition], and how many copies were printed,” says Bonhams’ Mr Ehling.

The origin and history of a book also play a crucial part.

In 2022, a first printing of Harry Potter and the Philosopher’s Stone sold at Bonhams in London for £220,000 (about Dh1 million).

“The cover price for this first book in the Harry Potter series in 1997 was just £10.99,” says Mr Ehling.

Seek out first-edition, first-print books by promising authors who are not famous yet.

“First-edition books have errors and typos made by either the editor or the author,” says Mr Dogen.

A book's content also significantly influences its appeal. The most prized books are those that altered the course of history or enhanced human understanding.

Examples include the Gutenberg Bible (1455), Isaac Newton's book on gravity Principia Mathematica (1687) and Charles Darwin’s On the Origin of Species (1859).

The best places to buy rare books

Apart from renowned auction houses, book lovers can scout digitally at AbeBooks and Biblio. eBay, Amazon and search engines Bookfinder.com and BookScouter can also be used.

Enthusiasts are also known to have stumbled upon precious pieces of work at unusual places.

“Estate sales, garage sales and thrift stores or collectable malls, swap meets or flea markets all have [turned up] great finds,” says Ms Guerin.

The Antiquarian Booksellers' Association and the Antiquarian Booksellers' Association of America have rich archives of knowledge on book collecting.

Investing in rare books is a refined art requiring a discerning eye and a nuanced understanding of the market.

After all, it’s an investment in literature, not just leatherbound pieces of paper.