As children, many of us may have dreamed about collecting comic books, baseball cards, jewelry, stamps, or art. For many, those dreams have not yet come true, but it is never too late to start collecting. With the right portfolio, these collections can become valuable tangible assets for investors. We’ve all heard of how physical assets can help diversify portfolios and investment strategies. However, choosing a tangible asset to invest in can be arduous.
In previous years, tangible assets were seen as strategies for only high-wealth investors, but that is no longer the case. While not everyone can afford a classic car or fine art collection, many can afford some type of physical asset to diversify their portfolios and help protect them from losses. In fact, many investors already own some type of physical asset, whether that is a car, a piece of jewelry, or a family heirloom.
Since they don’t tend to move in step with the stock market, tangible asset investments can help a portfolio withstand some market volatility. These alternative investments can help protect from any market losses. They may not be influenced by economic trends, but these assets are still affected by supply and demand. A physical asset can also be affected by its physical state. Depending on the type of assets, such as art or wine, there is a fair amount of maintenance that goes into keeping the value of these items high.
Therefore, it’s important for investors to know how to choose among these assets. While there are many options, ranging from sports memorabilia to precious metals, it’s imperative that the individual investor has some type of interest in the chosen asset. For example, if the investor is a die-hard sports fan, then signed sports memorabilia or jerseys may be a great choice. Tangible assets are not very liquid; before taking the leap, an investor needs to know the industry and worth of these investments.[Editors’ Note: For more about protecting your assets, you may want to read How to Protect Your Assets Now to Cover Your Ass(ets) for Later]
Sports memorabilia is perfect for the sports lover only. If an investor is planning on purchasing memorabilia and hoping for it to appreciate in value, they not only need to know what they are dealing with, but also how to assess the condition.
Let’s use baseball cards as an example. As a sports aficionado, you should be able to identify the following factors that can affect the card’s value:
So, just how much are highly sought-after baseball cards worth? To date, the most expensive baseball card bought at auction was a $6.6 million “Jumbo” T206 Honus Wagner card in circulation from 1909 to 1911. The card commanded this price tag due to its history, size, and rarity.
Being ignorant of an item’s value can cost you dearly. For example, one Maine family sold an old baseball card alongside a pile of other garage sale items for $100. The man who bought the seemingly worthless stuff later went on to sell the baseball card for $92,000. The rare baseball card was actually dated back to 1865. Not knowing much about sports or the industry could cause investors to make similar mistakes and miss out on huge returns.
Fine art is a tricky investment. As they say, “Art is in the eye of the beholder.” What one person likes, another may not be able to appreciate in the same way. Personal tastes certainly play into value – which is why the price of a Jackson Pollock and a Van Gogh can differ by $50 million.
In order to have quick returns, you must purchase works from well-known artists. However, if you are willing to hold on to the piece and keep it in good condition, you can be rewarded with large returns later on.
Investors must also be careful to get these physical assets appraised from time to time, or they risk losing money. A piece purchased this year may not sell for the same amount next year. Knowing the current value of the asset, not just the purchase value, is very important. An appraiser will look at several factors, including:
In recent years, due to a culture and market shift, NFTs have become a controversial asset when it comes to art investment.
Welsh poet George Herbert once said, “that is gold which is worth gold.” In other words, there are precious metals other than gold that can provide similar assets and returns if buyers know what they are getting into. Having these assets physically (bars, coins, or jewelry) is very different for investors than having investments in related Exchange Traded Funds (ETFs) or stocks. When these items are physically owned, investors have more control over them than investments in the market.
Physical precious metals can’t default on their value, and it is difficult to physically manipulate this tangible asset. In recent years, precious metals have begun outperforming the Dow Jones Industrial Average (DJIA), and silver and gold remain great stores of value. This has been the case since late 2021 and shows no signs of letting up, with many experts predicting it could continue for many years to come.
With tangible asset investments available in everything from comic books to antiques, it’s important that an investor does their homework. While these investments are a great way to gain some protection in case of market losses, investors must first know their worth. Matching the right asset with the right investor can not only boost a portfolio but can also make childhood dreams come true.
This is an updated version of an article originally published on June 30, 2015 and previously updated on May 21, 2019]
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