Chart: Investing in the Finer Things in Life
Outside of the mainstream world of stocks and bonds, there exists an interesting cross-section of alternative assets that only really gain appreciation from a relatively small group of elite investors.
These luxury collectibles – things like fine wine, classic cars, rare stamps, colored diamonds, Chinese ceramics, and fine art – are unquestionably fun to hold as investments and even to talk about. But do these alternative assets also perform as investments over time?
EYE OF THE BEHOLDER
The obvious challenge with valuing an item like a prized Picasso painting is that beauty is in the eye of the beholder.
Investors can rely on expert opinions, their own experience, historical evidence, and longstanding markets for these asset classes. However, at the end of the day, the price an investor is willing to pay is ultimately subjective, which can get compounded by the fact that these markets also tend to be illiquid.
If you’re buying or selling one of these assets, this can either work in your favor – or you can be stuck with a classic car in your garage that never really panned out in terms of price.