Previously, in this column, we talked about passion assets viz. assets that are collectibles and have investment value like art and antiques. Here, we discuss the need to be mindful of portfolio portability when investing in passion assets.
Investment portability
If your professional life requires you to continually relocate, investing in physical assets is not optimal; each time you relocate to a new city, carrying physical assets with you can be expensive. Financial assets are better as they are in an electronic form and offer portability. That said, there are benefits of investing in physical assets (read passion assets).
You can invest in small-sized rare collectibles that are easy to carry when you relocate. There are two reasons to consider such investments. One, you can display these assets till you sell them. So, they offer the unique opportunity of being both a consumption asset and an investment asset. And two, they do not exhibit the degree of volatility you experience with financial assets. Of course, some of it can be attributed to the fact that, unlike shares, passion assets do not have visible prices; less visible the prices, less the perceived volatility. The value for passion assets comes from scarcity, age and narrative. An old ceramic tile may not be a collectible, but it could be if were to come from, say, a 19th century landmark building.
Note, investment selection is important for passion assets as they are for stocks. You must be mindful of numerous reproductions (read fakes) that are likely to be passed off as antiques. Also, storage costs are an important factor. For instance, humid weather is not good for paintings unless there is a climate-controlled room to store the prized collection. The same can be said for rare and first edition books and manuscripts.
Conclusion
It is optimal to have passion assets in investment portfolio. But you must be mindful of the transportation cost and transit damage, if you relocate often. It is best to start with small-sized rare collectibles and widen your collection when you eventually choose a city as your permanent residence.
In your early investment years, you must strike a balance so that you invest in such assets without largely affecting the portfolio’s portability. At the extreme, you can let professional firms store paintings and collectibles. But it would mean you cannot enjoy their benefit as a consumption asset.
(The author offers training programmes for individuals to manage their personal investments)