Best collectible investment in 2014? Hint: Vroom vroom

It won't be long before people start putting Ferraris on their walls.

A new investment analysis of collectibles shows that classic cars are vastly outperforming the art market and were the top-performing collectible investment over the past year. For the 12 months ended in October, cars as a category posted returns of 25 percent while art was up only 5 percent, according to a report from Douglas Elliman and Knight Frank, the global Realtors.

Cars beat art over the longer-term as well, clocking gains of 111 percent over five years (compared with art at 17 percent) and gaining 469 percent over 10 years (compared with 226 percent for art).

A 1962 Ferrari 250 GTO became the most expensive car ever sold at auction this summer for $34.65 million.
Amanda Weindel | CNBC

While art may get the bigger headlines, with $100 million Giacometti sculptures and $82 million Elvis pictures, cars have been quietly stacking up bigger gains. The question is whether those gains will continue as the global economy slows and sellers demand ever-higher prices.

"I'm not sure that classic cars can carry on their performance at the rate we've been seeing," said Andrew Shirley, author of the report.

The car market is also highly concentrated to a tiny slice of cars at the top—mainly Ferraris, Porsches and Mercedes. Ferraris from the 1960s are driving much of the price growth for the market and have almost become their own market.

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Of the top five most expensive cars ever sold at auction this year, all five are Ferraris—topped by the 1962 Ferrari 250 GTO that sold for $38.1 million at Pebble Beach.

Overall, investing in high-end collectibles has been more lucrative than investing in stocks. Over the past 10 years, the Knight Frank Luxury Index (which tracks collectibles from cars and art to stamps, wine, coins and furniture) is up 182 percent while Dow Jones is up 62 percent.

Prepare for a volatile ride

Yet collectibles also have a dark side—they are highly illiquid and highly volatile. According to the report, art has been far more volatile over the past 10 years than gold, equities or real estate. Among collectibles, coins and furniture were the least volatile.

Coins, in fact, have had a strong, if underappreciated, run recently. They returned 10 percent over the past 12 months and 90 percent over the past five years, ranking second as investments just behind cars.

The worst investment when it comes to collectibles has been antique furniture, with negative returns of 8 percent over the past year and 24 percent over the past decade.

And even within collectible classes, like art or cars, there are winners and losers. Broadbrush indexes can be deceiving in markets where it's only a select few examples at the very top that outperform and skew the results.

In the art market, for instance, so-called "pop art" that includes Warhol, Ed Ruscha and Roy Lichetnstein, is up 89 percent over the past year. But so-called "modern painters" such as Mark Rothko, Cy Twombly and Robert Motherwell, performed better over the past five years.

"These luxury assets can outperform more mainstream investment classes such as equities, but not every luxury investment will always outperform," Shirley said. "And even within segments, not everything is a guaranteed investment winner."

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