Perhaps the most traditional way of investing into real assets is to buy an investment property. Often investors feel comfortable buying property as its something they can understand. You can visit it. You can touch it.  You can also buy other real assets. Art, Classic Cars and Wine are examples.

Over the last 10 years, according to Knight Frank, classic cars have risen by 334%

Wine is up 192% over 10 years. In the last 12 months, art is up 21%.  Last year, a 1956 Aston Martin DBR1, raced by Sterling Moss, was auctioned by RM Sotherby’s for US $22.5 million.  Michael Schumacher’s Monaco Grand Prix-winning racing car has sold in New York for $7.5 million (€6.35 million), auction house Sotheby’s said, setting the world record for a modern-era Formula One car. One could ask why not more; its hard to drive around the streets!

Why do people buy real assets? There is often a feeling of comfort with such investment decisions. You take an interest in wine or art or classic cars. If you are interested, you allocate more of your time. You become more of a specialist. You read more about what you are interested in. You talk about it. You become more emotional towards buying and investing into these real assets. However, such expertise can be a problem. In behavioural science, it’s called confidence bias. Knowing what you know, you can convince yourself you are getting a great deal when the logic may give you a different answer.

Norman Braman, a US collector, loves his art. He is reputed to have said when overpaying for art, “the market will catch up”. He may be right if you have time on your side. Nevertheless, buying quality art is another advantage. However, to buy the very best art or cars or perhaps some Chateau Lafite, you need to be very wealthy. If you make a bad decision, it’s unlikely to affect your future financial security. If you cannot buy the very best, you need to ensure you carry out as much due diligence as possible. As things can go wrong.

At an recent investment conference, I was told the story and a wealthy individual who wanted to buy a Mercedes 300SL. The price was over US $1m for the 1957 car. The colour was perfect for the buyer; yellow, exactly what he wanted. Papers were drafted by lawyers. Everything was set to go but eventually, the buyers’ adviser’s professional nagging to check out the provenance was agreed. As there were only over 500 cars made, providence is possible. The buyer eventually agreed and the engineers arrived. They said they had seen the same car last year. It was white without a chassis number.

Clearly somewhere along the line there was massaging of the truth. Even art cannot always have clear provenance for the consumer.

Buying art, classic cars and wine, is not regulated. It really is caveat emptor. As such, there is no real protection the consumer.

Some practical thoughts to leave you with.

When you are thinking of buying real or tangible assets, ask yourself why? What are the reasons? What are the risks? Are you clear about the costs of ownership? What if you make a mistake, how easy it to rectify? Could the bad decisions impact on your future financial security? With art, wine and cars…there is also the pleasure of ownership. So how do you align an investment decision with your pleasure? It’s easy for emotions to persuade you that you are making a great decision.

The key issue is working out and writing down why you want to buy. Have you got valid reasons?

Having a written document that explains your decision to purchase is an absolute must.

How can we help?

If you like the idea of owning real assets, it starts by you thinking about it. When you’ve done your thinking, come and talk to us. We can help you clarify your thinking. To check if there is anything you’ve forgotten and if your decision is balanced. And if you are a seasoned investor, what’s next for you to talk about?

Whilst as The Wealth Coach, we are regulated financial advisers, We talk to clients about the questions they need to ask to build a framework for making good investment decisions. Whether they are regulated or non-regulated. We do not advise or make a recommendation for non-regulated investments, but we do help investors build their knowledge and to think about processes and procedures needed to help make sure the decisions they make are well considered.  If an expert is needed to solve a problem we cannot help with, we bring them in for you. The more you build knowledge and thoughtfulness about what questions to ask, the chances of making good outcome increase enormously.

Final thought..want to know which wine to buy? Try here