When it comes to investing, “not putting your eggs in one basket” is often a sensible approach. Aside from putting money into a savings account or investing in the stock market, you can consider allocating some of your investments towards alternative assets. In this post we will outline some of the top reasons to explore adding alternative investments to your investment portfolio.
If there’s one thing investment professionals agree on, it’s the importance of portfolio diversification. As it’s impossible to fully predict things like consumer trends, you typically wouldn’t want to put all your money into stocks of companies operating in the same industry, but rather spread it out over a variety of companies.
Taking this strategy one step further, you can look beyond investing in the stock market and add alternative assets to your portfolio, many of which hold low or no correlation to the stock market. This means that if the stock market goes down, prices of these assets are not affected, helping you generate more stable returns over time.
A number of alternative asset classes have generated strong historical returns. According to the Knight Frank Wealth Report, classic cars have returned 193%, fine wine 127% and handbags 108% over the past 10 years. Moreover, some of these assets have shown to be more stable than the stock market. For instance, the price of fine wines has proven to be less volatile during major events, such as the onset of COVID-19. Another asset class that has seen prices soaring is that of trading cards, such as sports and Pokémon cards. In 2020, prices reached all-time highs with some cards having gone up in value 10 times within a 4-year time span, with items being sold at multi-million dollar valuations.
Who says investing can’t be fun? Whenever you invest it makes sense to do your homework and consider factors such as price history, volatility and what drives prices. Keeping track of a market and reading up on what to buy is a lot more enjoyable if it’s something you’re interested in, compared to going through a company’s annual report. Chatting with other collectors, waiting for your favourite items to come on the market and predicting what’s going to be trending is all part of the anticipation and excitement!
When you invest in collectibles, one of the key reasons for price appreciation is demand from another collector or investor looking to buy the same item for a higher price a few years down the line. At Koia, we fractionalise ownership of assets, which means you can own a fraction of an asset at an accessible price. However, in non-fractionalised form these assets are expensive, meaning the ultimate buyers are typically wealthy collectors. Over the past decade the number of billionaires has almost tripled and the number of millionaires is booming too, and it’s expected the growth will continue. All of these are strong signs that there will be no shortage of demand for luxury goods and collectors items.
Many alternative assets, such as real estate and collectibles, are tangible. Whereas money is constantly being printed by governments, resulting in inflation, these assets can’t easily be reproduced and in the case of limited edition collectibles brands ensure there will be a finite supply. This means that as long as there is demand for the asset, it will retain its value. What’s also unique about assets such as fine wine and whisky is that as bottles are consumed, the supply becomes rarer over time, resulting in an increase in value. A similar concept applies to classic cars, for example, where there is a limited supply and as cars get driven, items in prime condition become scarcer as time passes.
There are various reasons to consider adding alternative assets to your investment portfolio. The most important ones are diversification, generating investment returns and having the ability to invest in what you know and love. As demand for the assets is growing and there are unique market dynamics limiting supply, there is strong reason to believe prices will continue growing and now is the time to consider investing in alternative assets.
At Koia, we allow you to start investing in tangible assets for as little as €50, via fractional investing. Our experts make sure to source and buy the best assets, and we take care of authentication, storage and insurance. All of the benefits, with none of the hassle.
The articles and information made available on Koia are provided for information and educational purposes only and do not constitute financial advice. You are advised to consult with an independent financial advisor for advice on your specific circumstances.