If you want to invest in collectibles, you will need to purchase things like art pieces, antiques, and wine.
Collectibles fall within the realm of speculative assets. They are considered speculative assets because the outcome of your investment in them is highly uncertain. For you to sell, you will need a buyer willing to pay the price you’ve set for the asset without any underlying cash flow.
Collectibles are generally illiquid assets. That means you can’t convert them back to cash easily, as there is no daily market transacting these assets. You are expected to buy and hold for the long term before considering selling.
Should we then invest in collectibles at all? We’ll explore the two most popular options below.
Some companies are starting to enable investing in shares that represent a collectible – artwork in particular.
One example is Masterworks. They are the first investment platform for Artwork. With Masterworks, you can purchase shares representing ownership of a painting similar to how you would purchase shares in a traditional company. These are fine art pieces, and the expected return on investment, as per their website, could range between 8% and 20% of median annual returns.
Another popular way to invest in collectibles is to invest in wine. But is this a profitable investment?
According to a paper called The Price of Wine, published in 2014, the real financial return of wine between 1900 and 2012 was 4.1%, which exceeded government bonds, art, and investment quality stamps.
They also mention the following survey results:
A recent survey by Barclays (2012) indicates that about one quarter of high-net-worth individuals around the world owns a wine collection, which on average represents 2% of their wealth.
Not all wines are created equal, so choosing the right wines is the key. The paper proposes a model for the price dynamics of wine, taking into account several inputs.
If you want to learn more about investing in wine, take a look at Cult Wines, which has comprehensive guides in wine investing. There’s also The Wine Investment Fund. They work with all types of investors to help them maximize their wine investment.
Invest in Collectibles is a part of our guide Alternative Investments For Beginners. Read up on other popular types of alternative investments: