Alternative Investment: Collectibles (7 of 8)

Alternative Investment: Collectibles (7 of 8)

alternative-investment

Collectibles include classic cars, fine wines, art, stamps, furniture, antiques, watches and jewellery: they are rarely approved for SIPPs but store wealth due to their status as highly desirable items

Risk Level

'Collectibles' are Risk Level 7 of 8 in Alternative Investments.

Investment Case

Collectibles are often added to investment portfolios to exploit diversification and therefore potentially limit risk.

Personal Interest

The best way to invest in collectibles is to have a strong personal interest. This helps people develop the experience and expertise necessary for successful investing and provides a great insurance policy in the event that the investment is not successful – the investor can derive a personal benefit from owning these kinds of items, regardless of returns generated.

Diversification

The items are physical, tangible stores of wealth that may well provide uncorrelated returns and protection from ‘financial repression’ – high inflation, currency devaluation and taxes that erode the value of other savings. Collectibles are not likely to be directly affected by stock market crashes or changes in economic policy.

A Play On Luxury?

Many collectible alternative investments derive their value from the status of being highly desirable luxury items - and this is boosted by increasing demand from emerging Asian markets where purchasing power is increasing. Some investors feel this new area of demand will continue to drive prices higher.

Findings

Top Collectibles

alternative-investment

Summary

Although collectible alternative investments have diversification benefits and the story behind the growing demand for luxury and recent rising values is positive, these kinds of assets must still be treated with caution.

Investment Fundamentals

  • High investment returns
  • Store of wealth
  • Highly desirable
  • Transportable
  • Not generally SIPP acceptable
  • Extremely diverse market

Investor Conclusions

Investing in these assets requires a high level of specialist knowledge. They are not fungible (a good or asset that is interchangeable with other individual goods or assets of the same type), so therefore investors must be able to accurately assess every purchase they make or place their trust in a broker or agent who has the required knowledge. Often the strong performance is based on a narrow group of assets, such as Bordeaux Premier Cru with wine or just 50 types of car that meet the stringent criteria for inclusion in the HAGI index.

Purchases outside these narrow groups may be more risky investment propositions. Investors must also consider the costs of storage, insurance, maintenance and upkeep. The value is based on what buyers are prepared to pay so, if the fashion for owning these items changes and demand falls, they could be dramatically devalued. Consider stamps, where most of the collectors are elderly – will there be another generation of collectors in 20 or 30 years’ time?

Nevertheless, there are real benefits in having a tangible store of wealth not correlated to other assets and providing protection from financial repression. Developing the required knowledge and expertise in these areas can also be a fascinating pursuit.

Please Share This

If you’ve found this page of interest, please would you kindly send a link to it to your friends and colleagues using the buttons below.  You’ll be helping us out, and they might like it too.  Thanks, it's much appreciated.

 

How To Earn 13 Per Cent On Your Money Now

It's Back, But Not For Long, So Check It Out Now!

Register Now Before The Offer Closes

Get Valuable SIPP And SSAS Insights Emailed Directly To Your Inbox Every Monday

  • Please use an email address you can access. You can unsubscribe at any time.
IMPORTANT NOTE: NOTHING FEATURED ON SIPPclub IS EITHER AN IMPLIED OR A SPECIFIC RECOMMENDATION TO MAKE, OR TO REFRAIN FROM MAKING A FINANCIAL DECISION.  THIS PAGE HAS NOT BEEN APPROVED AS A FINANCIAL PROMOTION.

As SIPPclub neither advises on, nor arranges, nor recommends specific investments or strategies, we're unable to say whether a SIPP or SSAS or any investment within it is right for you. Ultimately, it’s your money and your decision, and you should only proceed once you're satisfied you've undertaken sufficient due diligence. If you need advice, you should speak to your trusted adviser, or you could find a local adviser from Unbiased.co.uk.  Alternatively, we'd be pleased to introduce to a suitably qualified independent financial adviser.

Please read our full Terms which includes criteria for SIPPclub membership.