You’ve restocked and played games, and now you’re wondering how you can make your money work for you. Sure, you could dump it in the bank and collect a small percentage in interest every day. Or, you could invest it! You’ve probably heard a lot about investing in the stock market, so I won’t cover that. Instead, I want to give you a rundown on the basics of an alternate form of investing: item investment.
What is it?
Item investment involves buying items and then reselling them for a higher price. Now you might ask, how is this different from restocking or Shop Wizard sniping? Well, when you restock or snipe, you’re buying an item for a lot less than its current market price and then reselling the item immediately for its current market price, which, if you’re fortunate, is much higher than what you bought the item for. Item investment is different. With item investment, you buy an item at its current market price, wait patiently for its current market price to increase substantially, and then sell off the item at its higher price. If you’ve done it right, you can make quite a hefty profit.
It sounds kind of like the stock market, but there are some key differences. Both forms of investing involve risk, but here is one reason why I prefer item investment to the stock market: you can pick and choose your items carefully based on market analysis and sound arguments, but in the stock market, you can’t reliably predict how the stocks will change. All you have to rely on in the stock market is past performance because you can’t analyze the companies with stocks to predict how they will do in the future. With item investment, however, you can construct reasoning to base your purchases on. I will teach you how to analyze the market to significantly reduce the risk that your chosen item will suddenly decrease drastically in price, never to rise up again.
The key to item investment is to look for two things: limited or decreasing supply and a steady or increasing demand. We’ve all heard about the economics of supply and demand, but this particular setup is what will definitely make prices rise, so it is what you should look for and think about with every item you want to invest in.
If the supply of an item is limited, meaning that there isn’t an infinite influx, then there is no way for increased supply of the item to bring down the price. In looking for items with a limited supply, you want to look for items that were released before but won’t be released again. A good example is retired items; since they’re retired, you can safely assume that no more will be entering the market. Another example is r101, or special, items that come from site events. Many of these items were released once, and although they are not officially retired, it is pretty certain that they won’t be released again. Please do your research though, as many r101 items are given out as prizes in different games around the site, and these items will still be coming into the market. Also, some items are labeled as r180 and retired, but they aren’t actually retired.
Examples of items that have a decreasing supply are consumables: things that disappear or go away in some way after being used. Food and books are obvious examples of consumables because after pets eat food and read books, the items disappear. If you think a little further, you might also realize that you can count stamps and coins as consumables because although they don’t disappear, once they are put into a user’s album, they cannot be taken out and sold again. Likewise, petpetpets, once attached to to a petpet, cannot be removed intact because they will disappear if the petpet is unattached from the pet. Another possible example could be petpets because after they are given to a pet, they usually stay there for awhile.
Limited and Decreasing Supply
What can I say about this? Combine the two good situations above, and you’ll have on your hands an ideal supply situation. :-) If an item is released once and then never again, and users and pets are still actively consuming it, then that would be an excellent item to invest in. All over Neopia, this item will be disappearing, which will continually drive its price higher. If you play your cards right and buy at the right time, then you can make incredible profits reselling the item later at a higher price.
The second part to the equation is a viable, sustained demand. When choosing an item, think about why anyone would want to buy this item. Good, constant motivators include anything that can be displayed to other users, such as high scores in games or the Battledome, trophies, and avatars. You can always find users who want more trophies for themselves or their pets, who want to collect as many stamps as possible, who want to make their pets the strongest in the Battledome, or who want as many avatars as possible because these statistics are all visible on a user or pet lookup. In most cases, you’ll find users who want all of the above! When there is some kind of tally system in place, and people can immediately see their efforts and Neopoints being rewarded, then that is a great motivator.
To illustrate this point, let me elaborate on what I mean by a sustained demand. Earlier, I talked about food being consumable. While this is true, most people may be unlikely to pay high prices for food because there are cheaper options readily available, like omelettes and fish. Gourmet foods, however, are a different story. Since there is a gourmet food high score table and trophies awarded to pets who have eaten many gourmet foods, gourmet foods are more in demand than other kinds of food. This is an example of a sustained demand. Likewise, because of the books high score list and a pet’s intelligence statistic, books also have a sustained demand.
Demand for an item will increase when that item’s purposes change somehow so that it is suddenly more desirable. Examples of items with an increased demand are ones that have recently been made wearable or are necessary for an avatar. Because of the change in what these items can do, more people will want more of them, which raises demand and therefore raises prices.
Investing in an item with increasing demand is best when you invest in it before its purpose changes so that you lock in the lower market price before demand starts going up. This can be risky, however, because it’s impossible to know for sure if the item’s purpose will change at all. Likewise, it’s also risky to invest in an item right after its purpose changes because that’s when demand will be at its highest, and you may be buying the item at a peak price, which will later fall once demand starts stabilizing.
Please remember that it is fine for you, as an individual, to choose items you want to invest in; however, it is against the rules for a group of individuals to collude and buy up an item to actively maintain a falsely inflated sale price. This is termed “group inflation” or “group hoarding” and is not what item investment, which is buying an item at market price and then waiting to sell at a higher market price, is about.
I’ve explained to you the ideal situations you want to look for when you choose an item to invest in. Hopefully I’ve given you a better understanding of how the market works and how you can best utilize item investing to your advantage. Keep these tips in mind when you choose your next item investment, and just maybe you’ll be the one who foresaw the next big thing.