Most wealth managers recommend adding tangible assets to investment portfolios. Tangible assets, a form of alternative investment, can be a hedge against inflation and recession because these assets are rarely directly affected by the market. While their value can be indirectly affected if they are sold during periods of recession, as long-term assets they can help diversify and protect wealth.
In addition to providing a hedge against risk, tangible assets are also personally fulfilling and satisfying for many people. For the wealthy, who know no needs, collecting rare and hard-to-find assets can be an interesting challenge. Most investors collect in something that interests them for itself. Books, art, cars, wine, coins, and fashion all hold personal interest as well as investment interest.
Classic cars are one of those investments that you won’t see a return on for years. The most expensive classic car ever sold was a 1955 Mercedes-Benz that sold for over $1.4 million. Many cars are purchased and stored for decades in order to hold their value. These cars must still be maintained and can take years to increase in value. Other people prefer to find and restore old cars to their former glory, which is a very expensive hobby but often pays well when the cars are sold. This is another investment that works best if the owner knows and loves the investment.
Vintage wines from famous vineyards can be good investments. Like any investment, those who want to make money investing in wine need to know what they are investing in. When the wealthy invest in wine, they invest in very high quality wine from well-known vineyards, and they buy vintages that were produced in low numbers. Like all of the items in this list, scarcity is important to wine’s value. Advantages of investing in wines include lower risk and wine’s ability to retain its value during recessions.
When the wealthy invest in a luxury watch, like Patek Philippe watches, they are making a very low-risk investment. Luxury watches rarely or never depreciate, making them a great item investment for holding money. Because they are made in very limited quantities and are in high demand, they hold their value for years. In many cases, they increase in value dramatically. In addition, luxury watches are insurable, can be worn and enjoyed while still retaining their value, and can easily be passed on to other family members. And they are one of the most portable assets anywhere.
Wealthy families collect art, but not just as a hobby or because they want to support artists. Fine art pieces are a good place to invest or hold money. They often increase in value, especially if they were painted by well-known artists. Contemporary art from well-known artists typically costs a million dollars or more. Nearly 80% of wealth managers recommend adding art to a portfolio, especially for those who already have a passion for the arts. The advantages of investing in art include its long-term staying power, the enjoyment it can bring, and the potential income when sold.
Designer handbags are now one of the best investments that can be made- if you can get your hands on one in the first place. Designer handbags are made in very limited quantities and can have long waiting lists or be limited to certain people. For this reason, they can be a great investment. They can have a return of 80% and due to the limited supply, they are never hard to sell. This makes them one of the more liquid of the alternative investments. In some cases, handbags are so limited that once they are purchased by someone on the waiting list, they can immediately be resold for three times their initial value.
Coins and gold
The wealthy collect coins and other forms of gold. One of the reasons is because gold has a tendency to adjust in value separately from other assets and the market in general. When the stock market goes down, the value of gold tends to go up. This makes it an excellent hedge against market crashes. In addition, it is very liquid, making it easy to sell and transfer into cash. Gold is also a good protection against inflation.
Gold also has the advantage of being in high demand and relatively rare. Gold coins that have collector and historic value beyond their gold value are also good investments that usually hold their value. And with a little forethought, even the moderately wealthy can begin investing in gold and coins.
Wealthy collectors invest in expensive, rare, or old books because they hold their value. Once a book has reached collector status it will rarely if ever depreciate in value. During down-turns, books are rarely effected and, like other physical assets, they can be insured. They are easy to store and transport and relatively liquid. Most investors will buy books and hold them for a very long time. And unlike many of the other assets on this list, even the less-wealthy can get into the market because not all rare or first edition books are tens of thousands of dollars.