VALUE JUDGMENT Investors are now joining a legion of would-be duelists, samurai, gladiators and Vikings whose quest for the perfect blade has obsessed men for centuries. Truly fine swords with remarkable provenance can command five and six figures at auction. Average prices at the market’s high end are increasing by 20 percent annually. Yet collectors should beware: This hobby is awash with fakes, and even the most seasoned collector may have difficulty spotting them.

Greg Martin Auctions in San Francisco recently sold a presentation sword with diamond and amethyst inlay belonging to Civil War general George Henry Thomas. Abraham Lincoln presented the sword to Thomas in December 1864 for his staunch defense of Chickamauga Creek in northwestern Georgia in 1863. The sword, with accompanying documentation, sold for $224,000. "In the American market, swords used to play second fiddle to guns," says Martin, who is also a collector. "Not anymore. There is more and more interest in swords these days as they bring in even greater prices. They have been around a lot longer than guns and provide a unique link to historical events. And their ownership is not restricted by firearms laws—so even someone in New York City, where the gun laws are tight, can collect swords."

Martin began his collection by buying swords from the Revolutionary War period. He sought those with blue blades and brass scabbards. "I gambled on them back in the 1950s and was picking them up for $150 to $200," he says. "That has now paid off handsomely. Today many are easily worth anywhere from $100,000 to $200,000."

Perhaps the most consistently high-priced market—and the only one that has rough pricing guidelines—is the trade in Japanese swords. These are often passed down through families over centuries. They are made by famed swordsmiths with their own schools of apprentices who carry on the traditions of this highly esoteric and specialized craft. Collector Barry Hennick, director of the Japanese Sword Society of the United States, has been studying this field for two decades. "And I’m only now an official beginner," he says.

In 2003, Hennick realized a dream by buying a 14th-century katana sword by master swordsmith Norishige for $77,000. "I held another he had made once, and it literally made my hands sweat with excitement," he says. "Several months later, I had to have one." Maintaining them is an art form as well. Those who polish Japanese swords command a price of $100 an inch. For access to the best sword polishers, such as Jimmy Hayashi in San Francisco, collectors must join a nine-year waiting list.

MADE FOR the Chinese Qianlong emperor in the 1700s, the jade-hilted Baoteng Saber sold for $5.93 million in 2006.

Unlike with other swords, Japanese handles and scabbards comprise a separate field of study. Japanese swords are graded with a bewildering scale of complex quality guides. One of the premier appraisal guides is by Nihon Bijutsu Token Hozon Kyokai (The Society for the Preservation of Japanese Art Swords). This is a tiered sword-rating guide starting at the hozon level (worthy of preservation) going up to the tokubetsu juyo token level (especially important).

When Japanese sword enthusiasts convene, they often attempt to ascertain a sword’s history and manufacture by holding the weapon blindfolded. As a rough rule of thumb, size matters. The longer the blade, the higher the value. Buyers should look for katana blades more than 27 inches in length—these blades command premiums. They should be signed by the swordsmith and have documents attesting to their authenticity. Typically, juyo-level blades start at $20,000, with prized examples fetching far more. A signed juyo blade from the Koto period (pre-1600) made by Tomasa (either the son or grandson of famous Japanese swordsmith Masatsune) was offered recently for $95,000. Fine swords, however, can still be obtained for four figures. "Roughly $8,000 and up is where the quality starts," Hennick says. "Don’t expect to make your money back fast though. Would you buy a Picasso with the intention of flipping it? These are serious long-term investments."