Are Firearms a Good Investment?

Firearm prices began climbing in 2020 and continues through the first part of 2021. Some current gun owners may look at one or more guns they own, do a little research, and feel good about the fact that the going price may be 50% to 150% higher than they originally paid. Hey, it’s a chance to convert a gun to money. But few bought guns with a “big payday” in mind. So, when thinking about investing in guns, it is important to know: Are increasing gun prices typical? Who and what drives gun prices?

Investing in guns is similar to investing in coins, stamps, art, or anything that is “physical.” Most who buy these items do not think of the purchases as pure investments (like stocks, bonds, or real estate.) No, many think they are adding to a collection. They may only care about the value of an item for insurance or when they have a reason to convert it to cash. In my experience, most people who buy more than a couple of guns are collectors. I do not know many (any?) people who buy a gun as a true investment. That is, they never fire it, rarely handle it, keep all the original packaging, and invest in a storage area that helps maintain optimal humidity and temperature conditions. In other words, firearms investors keep the gun in “mint” condition anticipating a “big payday” at some point in the future.

What drives gun prices? As with all free markets, price is determined by supply and demand. Drilling further into the question, I think the gun market may simplistically be considered in two categories: Modern Arms for a particular use (e.g., home protection or hunting) and Collectibles (guns with some special background or desirability). Both are different gun markets with buyers and sellers that behave differently. Again, simplistically, the same major forces drive both categories: “News,” Product availability, and Purpose.

Who drives gun demand? Demand for Modern Arms is normally driven by the general public. These buyers are not interested in collecting firearms. They want a gun for a specific purpose. Once satisfied, these people will not likely purchase more firearms. A big driver is news (usually bad) that makes people become concerned for their safety. They want something for self-defense to feel secure and safe. That market is pretty big. There are many manufacturers of modern arms. By contrast, demand for historical or special firearms is normally driven by collectors. They are motivated by the same things that drive collectors of other “things” – rarity, condition, commemoration, provenance, and personal interest. Their purpose is to fulfill a collection goal. Collectors are always “in the market.” They patiently seek a particular gun and are ready to pay money (maybe lots) when one they want becomes available in a typically small market. Or, they buy because they believe something in the law may change that would render a gun unavailable.

2020: A Case Study. The past year has seen unusual strength in the gun market. I think there were three main drivers – the pandemic, violent protests, and the presidential election. The pandemic and the violent protests left many feeling uneasy about their personal safety. People of all ages became first-time gun buyers for the purpose of self-defense. Typically, these people were looking for one, maybe two, modern firearms to keep nearby “just in case.” Now that they own a gun, their purpose of feeling safe is satisfied. It is unlikely they will buy more. In addition, 2020 was a presidential election year. Typically, strong candidates with perceived “anti-gun agendas” will stir many people to anticipate gun restrictions. This can drive the public to purchase of modern arms. Collectors jump into the market too and make purchases “just in case” certain guns become illegal to sell (remember the 1994 “Assault Weapon” ban?)

So, the heightened demand for guns, especially modern handguns and perhaps some modern shotguns and rifles, drove prices very high as inventory sold out. In addition, ammunition availability dropped and, with it, prices spiked. If anyone has a modern gun to sell, now seems a good time. Lots of people ready to pay lots of cash.

Are increasing gun prices typical? What about historical or specialized guns? How about modern arms that are 10 to 20 years old? Or special commemorative pieces? Who is buying “collectible” guns? Collectors! For those familiar with this market, they know it is often finicky and unpredictable. Getting a good return (success!) in the collector market is all about getting the:

  1. Right buyer for the
  2. Right gun at the
  3. Right time.

Condition, provenance, popularity, and rarity are only some of the factors that determine the price for a “collectible” firearm. Frankly, a gun can be worth thousands to one person and nothing to another. The market for historic military guns can “shock” up or down based upon things like import rules and politics. Some reading this blog may recall that Mosin-Nagant rifles and Nagant revolvers imported from Russia 10 or 15 years ago sold for less than $100. Check out the prices now! Import bans curtailed supply and prices jumped. Likewise, if restrictions are lifted, prices will likely fall, maybe significantly.

So, l do not think investing in guns (buying with the purpose to sell at a decent profit in the future) is a good idea. I think the same about art, coins, stamps, and cars. These are great to collect and enjoy, but not to count on for cash in the future. Maybe there will be a day when a gun can be regularly sold at a nice profit, but don’t count on it.