By Lee Sherman
All investors are looking to increase the value of their portfolio. But let’s face it, the usual asset classes (stocks, bonds, mutual funds) don’t exactly spark joy. If you’re looking for an approach to investing that can be more rewarding (while still earning you money) consider “passion investing”.
With passion investing you can turn your hobbies into a money-making activity. If that sounds like a great way to spend your retirement, you’re right. Whether you’re a photographer with an interest in vintage cameras or an automotive enthusiast who likes to tinker with cars from the 1950s, you’ll find passion investing can work for you.
By now you might be thinking that passion investing sounds just like collecting. Well, it’s similar but if approached as carefully as you approach your other investments, you can have the best of both worlds, a constantly evolving collection of whatever you’re interested in (see list of common passion assets below) and a way to diversify your portfolio with some unique and more personal assets.
Investing vs Collecting
While some collectors buy and sell on a regular basis, and the value of an item is often taken into consideration, they are usually more concerned with things that they have an emotional connection to. You know the expression “one man’s junk is another man’s treasure? That describes collecting in a nutshell. In contrast, the main motivator in passion investing is achieving a return on your investments. Which is not to say you can’t have it both ways. In fact, many financial planners will recommend passion investing as a way to further diversify your portfolio. One difference between mere collecting and passion investing that is important to keep in mind is that done right, passion investing might require more knowledge about the items you collect.
Tracking the value of items over time is important to maintaining a portfolio that includes passion assets. Big shifts in value can occur because passion investing is much more subject to the whims of individual collectors. For example, it wasn’t that long ago that it was possible to score a mid-century mechanical Rolex watch for just a few hundred dollars in excellent condition because fashions had shifted to Quartz and digital watches. That same watch is worth thousands of dollars today.
Many collectors have a story about an item purchased at auction or an estate sale that shot up in value, due to rarity or even a trend. Of course, the reverse can also occur. Another thing to keep in mind is that these assets aren’t as liquid as the others in your portfolio. You’ll have to find the right buyer should you wish to sell them off.
What Qualifies as Passion Assets?
The list of assets considered to be passion assets is almost as varied as the individual investor but there are some common types. According to the Knight Frank Luxury Investment Index the top ten types of passion investments in 2019, based on sales at auction are:
- Art
- Whiskey
- Jewelry
- Watches
- Classic Cars
- Wine
- Stamps
- Coins
- Colored Diamonds
- Furniture
The main takeaway is that, while it may be more fun than traditional investing, passion investing is harder than you might think. You’ll need a lot of specialized knowledge and you also need to establish trusted relationships with dealers, auction houses, experts and other collectors who can help you verify the authenticity and provenance of the items you’re collecting. Do this and passion investing can be a journey that leads to an ultimate reward.
Lee Sherman is a contributing writer to www.myperfectfinancialadvisor.com, the premier matchmaker between investors and advisors. Lee is an experienced journalist and editor with over 30 years of expertise with a significant history of writing in the personal finance and technology arenas.
