Investing in model trains: Good idea or bad?

From time to time, I see the topic of investing in model trains, whether Lionel, Marklin, scale brass models, or any other niche come up. There was a time when people make a lot of money doing that. Sad to say, for the most part that window of opportunity is closed.

It’s certainly possible to make money at your hobby. But investing in collectibles tends to be fleeting, so it’s something you should approach with extreme caution.

Why Lionel trains were once a profitable investment

investing in model trains
These priceless museum pieces are still valuable, but not as valuable as they would have been in the 1990s. That’s why I don’t recommend investing in model trains.

Lionel trains were a hot collectible for a few decades because of age demographics. Their prices rose and fell based on the number of middle-aged men who remembered them from their childhood and wanted to relive those memories. That’s true for any other collectible, too.

The people interested in model railroading today lament that kids today are more interested in video games than trains, and that’s why the hobby is in decline. There’s truth to that, but that trend started way back in the 1960s. The country had a love affair with trains for about a hundred years, as trains provided infrastructure for economic growth and made traveling long distances much easier.

As much as we once loved trains, we love automobiles more. Maybe it’s not a majority opinion that trains are for people who can’t afford to drive, but enough people believe it that passenger trains are politically unpopular in the United States.

Sure, by 1977, kids liked video games more than they liked trains. But they liked slot cars and R/C cars more than they liked trains too.

What’s significant about middle-aged men?

Middle-aged men drove the boom period of Lionel trains as a good investment because it’s typically from about the ages 40-60 that people are best able to pursue hobbies. By age 40, their careers tend to be pretty well established, and they have disposable income. By that age, they probably have a house, so they have enough room to pursue a hobby that takes up space.

That’s why the value of trains went up in the 1980s, and the idea of Lionel trains as an investment took root. The people who spent the 1970s scooping up trains from garage sales and thrift stores made a killing, especially if they sold off some of their 70s finds in the 80s and 90s. But if you were buying Lionel trains in the late 80s and into the 90s expecting the value to keep going up and up, you might be struggling to make money at it now.

I’m Gen X. I know other people in my generation who like trains, but we don’t typically like them as much as our parents did. Most men my age would rather do something else with that money. Not all. But it’s easier to find someone my age who’s interested in R/C, vintage video games, or vintage computers than model trains of any sort.

So now we’re seeing trains that were priceless 20 years ago losing half or even 90 percent of their value, in some extreme cases. And vintage gaming or computing gear that was next to worthless 20 years ago is valuable now.

Do any model trains still have investment potential?

In theory, the best of the best may still have some investment potential. The best candidates are items in mint condition, with some rarity, ideally still boxed. Still sealed is even better. As much as some hobbyists make fun of the people they call “box collectors,” the stuff in a nice box is rarer. And the combination of rarities maximizes value.

Even then, there’s no guarantee. I buy trains because I enjoy them. And they’re better for my health than drinking, and unlike alcohol, I can get some of my money back out of them if I ever need to.

But to fund my retirement, I stick with stocks, even if 12 percent isn’t quite what they’re going to earn me.

Ways to make money off model trains

You can still make money off your hobby even if investing in model trains directly isn’t the best idea. You can still buy and resell them and make a modest profit. In that case, just need to think of it as a shorter-term thing than a long-term thing. Use a different window of opportunity and you can still make money.

You can write about them. There are still plenty of magazines that cater to the hobby, and the subject absolutely has blogging potential.

I know other people who fund their hobby by doing repairs on the side, or even building layouts for other people.

It provides a way to fund their hobby, even if it doesn’t provide enough to fully fund retirement.

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