Are Guns a Good Investment
When you are considering investing in guns you have to first figure out which kind of guns you are going to be investing in. For investment purposes there are two major types, collectable guns and stocks in gun companies such as Smith and Wesson or Ruger. Each type has its advantages, and disadvantages.
Collecting guns can obviously be something of a hobby, which can be both a good and a bad thing. It can be good in that it’s a rather expensive hobby and so those who participate in it are usually very wealthy, so If they want your gun they are likely to pay almost any price for it. Which would obviously be a great thing if you were in a situation like that but what about if you were trying to buy a gun that you thought would be a good investment and you were bid up by a collector?
One of the things you have to be aware of when investing in collectable firearms is that the prices don’t fluctuate all that often. This can be both a blessing and a curse because you don’t experience many of the rapid changes that the stock market does. For example in 2007, when the stock market crashed as a result of the recession, many investors lost upwards of 30% of their portfolios, while collectable gun prices stayed relatively stable. I realize that this makes collectable guns sound much more enticing but let’s also discuss one of the major drawbacks of collectable investing -taxes. The capital gains tax on collectables can get as high as 28% whereas the long term capital gains tax on stocks maxes out at 15%. In addition to those tax risks, collectables are not a permissible investment in an IRA, which means you would miss out on further tax benefits.
So are stocks in gun companies any better than collectable guns, or stocks in other companies for that matter? One of the unique things about the gun industry is that it is recession-resistant. Nothing is truly recession proof but guns come closer than most. You might even say that the gun industry is more closely related to politics than to the economy. With a democratic president taking the white house, the fear of gun prohibition has been looming ever greater, and I suspect that if he is elected to a second term stocks in gun companies will soar. A president in his second (and final) term is way more likely to do something that is not popularly accepted, like outlawing guns, because he is not worried about being re-elected.
People have been buying guns in bulk lately because of this fear and it has caused gun companies to have their sales soar, at one point, in the middle of this bad economy, Ruger had to stop accepting new orders because their production couldn’t keep up. This is probably one of the reasons why Ruger’s stock is up 145% in the last 5 years while microsoft’s is down 3%. Like any other investment, an investment into guns can be risky and you should always do your research but it is definitely an area of the market that has been doing really well, and will likely continue to do well, but like I said it might depend on things other than the economy.
