Collectibles offer accessible alternative investments

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When clients hear “alternative investments,” they probably think of opportunities available to the high net worth set. Historically, there has been good reason for that assumption.

Significant minimums, high fees, lack of liquidity, difficult due diligence, taxation issues and often opaque pricing structures are some of the barriers to entry. While the push to “democratize” alternatives has picked up steam in recent years, many clients — and advisors — still stay away.

But one type of alternative asset is probably more familiar and attainable to the average investor: collectibles. Under this umbrella falls everything from wine and whiskey to cars, handbags, guitars, watches and more.

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Most collectors don’t start out with a well-thought-out investment strategy. Far from it. Instead, they often build collections driven by individual passions rather than financial plans. For casual enthusiasts, collecting rarely makes financial sense beyond personal enjoyment.

But that doesn’t mean collectibles never pay off. With proper storage, sourcing, research, patience and a bit of luck, such investments can hold their value and sometimes deliver healthy returns.

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Take wine, for example: A bottle of 2005 Domaine de la Romanée-Conti (a red Burgundy), bought in 2009 for $10,000 to $11,000, can now fetch up to $22,000.

And the original Birkin bag, designed for and gifted to singer and actress Jane Birkin by Hermès in 1985, sold at auction in July for $10 million. 

Kurt Cobain’s 1959 Martin D-18E acoustic guitar, which he bought in 1992 for $5,000 and used during Nirvana’s “MTV Unplugged” performance two years later, smashed records at auction in 2020 when it sold for $6,010,000. 

The vast majority of collectors will not replicate such eye-popping returns. And experts say basing a portfolio on collectibles is a shaky proposition at best and a complete mistake at worst.

However, with the right transactions, clients could make enough to self-fund their collecting.

Scroll down the slideshow to read more on six cases in which collectibles can serve as investments.