According to Drake’s calculations,
the Barrett-Jackson index was up an average annual rate of 14.87 percent in the
five-year period ending January 1, 2003. For the same period, the Dow Jones
Industrial Average showed an average annual return of 1.73 percent, while
the Standard & Poor’s 500 index declined an average 1.85 percent. While this
comparison is striking, it is only half the story. Barrett-Jackson did not
provide a measure of the risk of its index (technically, its volatility), so it
is difficult to say if an investment in classic cars is more like a low-risk
investment in government bonds or a higher risk investment in the stock market.
If the former, its performance would be truly outstanding; if the latter, then
the comparison with the stock indices is more valid. Unfortunately, it is
impossible to tell from Barrett-Jackson’s index.On a rudimentary
returns-versus-returns basis, the Barrett-Jackson index performs admirably,
though it lags the equity indices. During the 10 years to January 1, 2003, the
Dow’s average annual return was 12.15 percent and the S&P 500’s 9.33
percent. The Barrett-Jackson index held its own at 9.1 percent. Over 20 years,
the Dow delivered an average annual return of 12.05 percent, the S&P
returned 12.67 percent, and the Barrett-Jackson index trailed at 10.36 percent.
According to Craig Jackson, president of Barrett-Jackson, the numbers would
have been more impressive were it not for a period during which many investors
got into the market for the wrong reasons. “After the stock market crash of
1987, a lot of people jumped into collecting, thinking of vintage cars purely as
an investment, and not as a hobby. They didn’t look at it long term, and
eventually our market crashed when it wasn’t the flavor of the month anymore,”
he explains. “Unless you know collector cars and really love them, I wouldn’t
suggest you buy one.”
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