Are Guns a Good Investment?

By | September 3, 2013

Have you ever thought about owning a gun? Not just for self defense or hunting, but as something you can own and overtime, use, ¬†and possibly sell later for a profit? Americans have always had an obsession with guns but gun sales have skyrocketed recently. At the start of 2013, background checks for prospective buyers have increased 44% over 2012. Compared to 2006, there were 9.5 million more NCIS checks for gun purchases. Some wealthy and even middle class people are purchasing guns as investments as the demand for certain firearms have been soaring. There are a lot of factors for this but the perception of gun control laws changing in the near future and the economic instability in the US and around the world have contributed to an overall higher demand for guns. So do guns make a good investment? Compared to stocks, bonds, gold, and real estate…probably not. Buying and selling guns are certainly more illiquid as there is the regulatory aspect to deal with. Every time you buy a gun the government has to know about it through paperwork and background checks. Not only that, you are limited to who you can sell the firearm to. No one that is underage or an exconvict can purchase these arms.

Image: U.S. Gun Sales Reach Record Levels In 2012

Pro:
When the end of the world happens, a gun for self protection would be invaluable and you can pretty much name your price. During the LA riots, or in the aftermath of hurricane katrina, there was a big markup on guns and ammunition, and still people would buy as much as they could. If you are thinking in terms of a zombie apocalypse, a gun would be invaluable and you would be able to trade a gun for food, medicine, and shelter, assuming the dollar goes to zero.

From an investment standpoint, guns that have a high chance of being outlawed or commonly used caliber bullets will always be in demand with prices steadily rising. If you bought a brand new full auto M16 from Colt Industries in 1986, you would have paid $1,490 plus a $200 tax stamp. Today, that same rifle would be worth more than $28,000. This is because of the “full auto” feature which today is no longer available. Even the ever so popular AR-15’s do not have an auto function, but instead the user would need to squeeze the trigger every time they wanted to fire a bullet (instead of just holding it down).

assault rifle2

Cons:
It is hard to say which guns would make a good investment. In general any sort of revolver is a bad investment unless there was special significance to it, or if some famous or historical person previously used the pistol. John Dillinger’s small pistol which he carried in his sock was recently auctioned for $95,600, more than twice its estimated value. Also, guns need to be maintained, cleaned, and stored. Rusty guns in bad shape do not fetch a high price. The traditional investment vehicles to invest for retirement such as roth IRA’s are not offered for investments in guns, so there are no tax advantages. But often times, gun owners may not report their gains on the guns they sold like they should, but that is a taxing issue. A big driver on a gun’s value is the legality aspect. If the gun laws are changed so that a certain feature of a gun is banned such as the full auto feature, but the older guns previously sold are still legal, then prices will skyrocket for those old guns. However, if those guns are made illegal altogether, then its resale value may drop.

Guns that have a good chance of going up in value:
-Good old 12 gauge shot gun
-Colt pistols
-Glocks
-common size ammunition
-Colt SAA’s
-Winchester rifles, especially pre ’64 Winchester Models 70, 73, 92, 94’s.
-Pre WWII S&W Registered & Non Registered .357 Magnums & certain other Pre and Post War 5 screw S&W’s

gun images

At the end of the day, guns are not good investments. They barely hold up to inflation. Even if you bought a gun 50 years ago for $25 and now it is worth $250, that same investment in the S&P 500 index fund or comparable mutual fund would blow that gun investment out of the water. So if you are a gun enthusiast or want a way to protect yourself and your family, then a gun may be a good choice for you. I personally like going to the shooting range and trying out different guns, but do not personally need one in the home.

The Easiest Way To Make Your First Million Dollars
Lending Club Update July 2013