For some people, investing just isn’t exciting enough. They love watching their money grow and knowing that they’re providing for their future plans, but the actual tools they use for investment just feel a little bland.
A fund is a fund, a bond is a bond. Some investors just need an instrument with some personality.
The reason so many people feel this way is that they often don’t understand that they can actually meet that goal. They can earn a good return and simultaneously invest in something that’s more than just fodder for empty conversation at cocktail parties. And many traditional investments just aren’t doing well right now.
If you’re the type who wants a solid return that’s backed by something with some character, there are quite a few options available for you. The exact route you choose is up to you, but keep several things in mind.
Demand
First, remember that most non-traditional investments involve something with an intrinsic value to a specific market. Vintage toys are a good example. When you purchase an old toy in good condition and store it properly, its value will build. Other collectors will be willing to pay more and more to purchase the item, all because you’ve simply waited it out.
Stocks and mutual funds, on the other hand, increase in value largely due to speculation. If the market thinks its value should increase, it does. If factors come into play suggesting it should be devalued, it will. Bonds have a fixed rate of return, typically very low, and end up as a steady performer but simply don’t carry the potential for a big splash of return.
Scarcity
Second, scarcity is key. This is what’s in play with real estate values. The old adage is that they aren’t making anymore land is absolutely true, and the same principle can apply to other investments. Finding historical autographs for sale and investing in one-of-a-kind items from the captains of government and industry is a great way to take advantage of scarcity. There will never be any more genuine articles created, so when you buy them, you have the opportunity to build real value.
Traditional investments, conversely, have the potential to grow in quantity. Stocks can split. Owners can reduce their percentage of ownership and offer more of the company for sale. Bonds can grow in number as municipalities seek to finance projects. The list goes on and on. Buying items–actual, durable, historic items–is a highly effective way to make the most of scarcity.
Knowledge
The final point to consider is your personal level of familiarity with the type of item you are purchasing. Because some of these rare investments are highly specialised, there is typically less information available about their appreciation in value. Consequently, it is beneficial if the investor knows a lot about the asset at the time of purchase.
This knowledge base could be driven by one’s own collections or just a relationship with someone else who collects. You can then use that knowledge to fuel your understanding of the potential value of an investment you’re considering.
And while it’s true that these items never lose value, your return is higher if you pay less for it. The best way to achieve that is to buy from thrift shops, online auctions, and even rummage sales where owners don’t realise the value of the item. A vintage Elvis Presley LP that’s worth $200 is the same whether you paid $5 or $120 for it, so acquiring it at a lower price will obviously increase your net gains.
Many fortunes have been built with traditional investment options. Many have also been lost, and those broken investors may have wished in retrospect that they had chosen the path less traveled with their money. Investing in offbeat items can be a very effective way to build your portfolio, and it can also be a far more colourful way.