I've never been one to recommend that people invest their life savings in electric trains. It is impossible to predict with certainty what trains will be worth 10, 20 or 50 years from now. But good judgement and common sense can help you invest your hard earned money wisely.
First of all this article is strictly restricted to investments. I know most people that purchase trains are doing it so that they can either play with them, collect them, or possibly re-sell them at a profit. But no matter what your purpose for the trains you buy, you are spending your hard earned money to purchase them. And some day you will have to sell them. Wouldn't it be nice to be able to sell them at a profit? More than not that doesn't happen these days.
Now if you are collecting or simply running your trains and could give a hoot about a profit when you are ready to sell because you are in it for the enjoyment of ownership and love of the hobby, that is fantastic! That is the attitude that I think everyone should have no matter what hobby they are in. Because hobbies are just that; something that you are interested in. Something that you have a sincere love for.
But there are those who buy strictly with the intention of cleaning up when they retire. Here are some thoughts of mine on this subject which are strictly my opinions. I know everyone is going to have an opinion on this one, and if you would like to discuss your ideas, please follow the link at the end of this article and go to our message boards and feel free to express how you feel!
The worst investment that you can make today in trains is to purchase brand new current date manufacturer's production. This was not always true. Back in the 80's and early 90's of the last Century production was limited to only one major manufacturer, and it was a booming market. (Not that it isn't booming today, there is just to much made now a days!) I remember back then many dealers would hold back inventory because they knew that it would be worth more within the next year. Prices soared to somewhat ridiculous levels back then. For instance, I will never forget probably the most beautiful steam engine ever made was the Lionel 8307 Southern Pacific 4-8-4. It was very difficult to find these engines. I am not sure what issue price for this particular engine was but I am sure it was under $1000.00. In 1989 This engine booked at $2000.00. That's a nice little profit.
And I use that only as on example. Almost all the collector series trains did just as well back then. But today, even though the engines have much better sound systems and other gadgets, the opposite is true. Lionel and MTH's on going war is part of the reason that they are somewhat kicking their own behinds because they are producing so many items these days that there just isn't enough money to go around. Almost any recent offering by Lionel can be purchased for less money on the secondary market from around 1997 on.
So if you are in this only for investment, stay away from the new items being introduced each year because the following year you will probably be able to purchase them for less money, and so on. Although as this wasn't the case 10 years or so, this could change at some point in the future if this on-going war ever stops.
And let's go back and look at that 8307 steam engine again. What is it's value today? Well I have one offered on my web site for around $700.00, but no bites yet. And I just auctioned one off on Choochooauctions.com and realized $494.00.
Now, whoever won that at that amount knows what he is doing, because that is a steal of a price for that engine in any market. Early MPC or Lionel Modern is low right now partly because of the war that Lionel and MTH are having in producing so much. And there are also a lot of those new sound systems and features that are really neat that people really like, and they have been shying away from the earlier Modern stuff. Ironically I heard just the other day that MTH is coming out with a new sound system that won't be compatible to their earlier engines. So if you want to update those earlier MTH engines, you will have to use some of the new Lionel parts. Now isn't that just silly? This is solely because two companies get so competitive that they refuse to work with each other on sound systems and other things, thus causing problems for themselves, but more importantly causing inconveniences and market depression that their customers have to suffer though. OK, enough said about that!
I've always tried to invest when a potential investment is low rather than high. Thus if you are looking for a good long term investment now, I recommend older MPC in new condition. Preferably more expensive items that have come down substantially in price over the years. You want to purchase items that no one else wants, and towards the bottom, and in my opinion the older MPC prices for the most part is very stable at current levels. Although current levels for the most part are well below the price guides, which have more or less ignored this change on the higher priced items.
American Flyer trains will always be a good investment, especially higher grade, harder to find items. American Flyer is a much smaller market than Lionel, but the collectors are so enthusiastic. And who is making it now? Lionel more or less orphaned American Flyer within the last couple of years. Unless Lionel who owns the dies and the name changes their mind and starts producing gobs of the old accessories and engines, this won't change. Although it is a small market, everyone that has an interest in American Flyer is a bonafide train nut. I know I am! And since American Flyer produced so few trains they can only increase in value over the years. And they have over the years! High grade American Flyer anything is very hard to find. But when you find it don't be afraid to pay to much, because I don't think that is possible right now. This market has a potential to be a fantastic investment over the long term.
Pre War trains in general have come more or less to the ‘antique toy' stage. This is where not just train enthusiasts are seeking them out, but people who enjoy collecting antiques are seeking them out as well. That is why it is so hard to find nice pre war, especially standard gauge. I see very little standard gauge offered anymore, at least to me. But it is still out there, and any time you can find good quality at a good price, jump on it, because like the trains themselves, that is a rarity.
Lionel Post war is mainly what I collect and invest in myself along with some American Flyer. I recommend the highest grade you can afford, because that is what will go up in value the most with time. Look at it this way, when the trains were sold a long time ago for instance a 736 in 1955 was retailed at 63.00. A 1615 sold for $29.50. Which one do you think was a better seller? Well I don't exactly know the answer to that, but I would guess the 1615 sold more mainly because the price was lower. One of the first things I learned as a train dealer was that if it was inexpensive back then, it is probably going to be relatively inexpensive today and not very rare now or in the future. And then what survived in excellent or better condition of more expensive items really makes higher grade items much more rare. How many brand new in the original boxes post war items do you have the opportunity to purchase in a year? And I'm not talking about the items that are actually Like New or Excellent plus. (Please refer to our archives on ‘The Art Of Grading Electric Trains' if you are new before starting to spend bucks on new post war!)
Marx trains have always been under priced in my opinion. Of course they made Marx trains withing 20 miles of our store, and we used to have it come in almost daily in bushel baskets from past employees. Very, very rarely do we see much Marx come in our store anymore. There are some pieces in Marx that are just impossible to find. The toughest one that I ever came across was a mint Canadian Pacific passenger set that I wish I would have kept for myself. If you can find rarer Marx in excellent to new condition at a reasonable price, latch onto it.
So what do you think will happen in 10 years or 20 years when all us baby boomers will be ready to retire and possibly sell our trains. Do you think the market will collapse and leave our train ‘retirement fund' dry? That's the question everyone's asking. I know they are!
I feel strongly that the market will be good in 10 years or 20 years or 50 years mainly because electric trains are unique. They've been around for over 100 years, and they'll be around for another 100 years if we don't blow this world up by then! Trains are a part of our culture and history. People will always be fascinated by them. Especially running around that Christmas tree!
Every market goes in cycles. There is a time when prices are low, and that is when you buy. And there are times when prices are high, and that is when you sell. And if you are a smart investor, you will include trains as part of your portfolio, especially if you like then. Because what better way to invest, than to invest in something you can really relate to?
But don't forget about that stock market and those mutual funds. Be smart and don't put all your money in one place.
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