Collectible assets – pros and cons of considering them as investments
Collectibles such as jewelry, gold, antiques, wine, and art make the most interesting investment deals. In fact, as opposite to stocks and bonds, collectibles can render better returns, and might even be a better way to keep your investment portfolio diversified. However, you are not advised to do it alone. To get things done right, you need a specialist. Three other things matter just as much: insurance, storage and maintenance.
A closer look at collectible assets
Also known as tangible assets, collectibles are things one can move around and touch. Fine wine, stamps, antiques are excellent examples. Also, for them to have any value they need to come in a limited supply. As far as their value is concerned, it is often determined by people’s wish to own them. Taste matters a lot, and many people invest in collectible for the pure pleasure of adding a rare piece to their collection; others however, want to keep investing and are planning on selling at the most convenient time.
Benefits of investing in collectibles
Collectibles can be a profitable form of investment, provided that you understand the implications. To begin with, they can be your trump card against inflation. Some collectibles – not all – have been able to match inflation, or even increase in value because of the inflation. Another great benefit is that collectibles provide you with a unique opportunity to keep your investment portfolio diversified. The more varied a portfolio is the more secure you are in the investment branch. In case one form of investment fails to render a good profit, you have the others to back up the losses. Needless to say, investing in alternative assets is fun. Many people do it for the mere pleasure owning something nobody else has. Fine wine in particular, has convinced many investors that this form of investment is one of the best. Apart from having an excellent product in your cellar, you can always enjoy it if you don’t want to sell it; or buy some more to trade for more exclusive bottles.
Disadvantages of investing in collectibles
Just like with any other form of investment, collectible assets feature their very own set of drawbacks. One of the most notable disadvantage is the lack of a sure profit. Most people invest in art, antiques or wine for the mere pleasure of owning them; very few do it for the money. As opposite to shares – which might provide investors with dividends – making money with collectibles can only be done if you choose to sell.
Another disadvantage is that alternative assets are expensive to keep and store. Wine in particular, is extremely sensitive. A temperature-controlled cellar is fundamental for your product to preserve its quality; your product needs to be handled by a reputable London wine investment company or merchant, not to mention that if you don’t have insurance and something happening to the wine, you risk losing everything.
Most collectibles – the most appreciated – sell only if there’s an increasing demand for them. But then again, it’s not a sure fact that people will want to buy at a specific time or date. This makes alternative assets risky and volatile. Nonetheless, if you want to transform a rare collection into a profitable form of investment, you need to stop thinking about the financial aspect. Sometimes going with the flow is a lot better than constantly thinking that you’re not going to make any cash out of that rare case of fine wine. Last but not least, it might be a good idea to get informed about taxes. Wine may be free (as long as it is stored in bond), but that’s not the case will all forms of alternative assets.