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Are Passion Investments Right for You?
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Are Passion Investments Right for You?
How wine, art and cars may be great assets in your portfolio

You’ve heard the expression that if you love what you do, you’ll never work a day in your life. What if you could apply a similar logic to the way you invest your wealth? Specifically, what if part of your portfolio involved using your capital to acquire assets you love with the idea that they would accumulate value during ownership? This is the idea behind passion or luxury investments.

Luxury investing is by no means a fast-track to financial independence. It requires patience, foresight and, more often than not, a considerable amount of wealth to begin with. But if you have a portfolio that could stand supplementation and a hobby that might be profitable, passion investing might be an approach worth your consideration.

What is a luxury investment?

You’ll occasionally hear stories about a rare sports car or work of art commanding a high gavel price at an auction and begin to wonder if the things you own have appreciated some value of their own. Luxury investing is ostensibly seeking out valuable items or items that you perceive as being valuable in the future and maintaining them until such a time when you can sell it at a profit.

Passion investments lie somewhere between business and pleasure. Investopedia.com’s Reyna Gobel suggests that the decision to invest in wines, for example, can be done out of love, in the interest of making money or some combination of both. Whether it’s more of a hobby or a financial endeavor, passion investments tend to require purchasing multiple pieces and building a collection, which itself requires a fair amount of capital.

According to the Coutts Passion Index 2017, assets that one might consider as potential objects for investment include properties, watches and jewelry, musical instruments, fine wines, stamps, coins, art and classic cars. There are other items that might qualify as luxury investments — collectibles, action figures, comic books and sports cards, just to name a few — but they are generally considered more volatile and less reliable for those looking to see a return on investment (ROI).

What are the smartest investments?

The Coutts Passion Index 2017 revealed that classic cars have provided the greatest ROI since 2005 at 331.9 percent, but that only coins have seen an annual increase — up an average 11.5 percent per year — over that same span. Watches, jewelry, stamps and fine wines were all shown to deliver returns of more than 100 percent since 2005; billionaire properties and traditional works of art from China have delivered returns of around 95 percent; and rugs and carpets and Old Master and 19th Century artworks were shown to have lost value.

The Knight Frank Luxury Investment Index for Q2 2017, published in September 2017, revealed similar insights with classic cars, wine and coins growing the most over a decade’s worth of data. Over the course of 12 months, it found that wine was seeing the best performance at 25 percent growth, followed by art at 7 percent. Speaking with Rupert Neate, wealth correspondent with The Guardian, Knight Frank partner and luxury index author Andrew Shirley said in December that it was his expectation “that art [would] comfortably overtake wine as the best-performing asset class” for the full year.

Whatever your preference or passion, luxury investments are likely only going to be for you if you already have a functioning wealth portfolio and the means to acquire assets. If this doesn’t apply to you, don’t feel like it means that you can’t pick up that limited-edition record or rare bottle of scotch you’ve had your eye on. Even if it’s not the beginnings of a luxury investment portfolio, if you work hard for your pay and are smart about how you spend it, you deserve to splurge now and then. And you never know — maybe that little thing you picked up will net you a nice, unexpected profit a few years down the line.


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Disclaimer - All content contained in this newsletter is for informational purposes only and should not be relied upon to make any financial, accounting, tax, legal or other related decisions. Each person must consider his or her objectives, risk tolerances and level of comfort when making financial decisions and should consult a competent professional advisor prior to making any such decisions. Any opinions expressed through the content in this newsletter are the opinions of the particular author only.
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