More and more investors are turning their collecting hobbies into profitable ventures, according to a study by Lloyds Private Banking. Collectibles are defined as being able to be touched and moved. They're characterised by limited supply, and their value depends on whether people want to own them.
The study conducted in 2016 found that antiques are amongst the most popular collectible investments and are expected to generate returns of 35% over the next 10 years, with one in six people investing to protect themselves from market volatility.
On average, £32,500 is the most spent on a single antiques investment, with almost two in five of the 500 investors interviewed (37%) spending more than £50,000 on an individual item. Only classic cars came out on top as the most expensive collectible asset at an average of £34,500 per investment.
On the opposite side of the pricing brackets, 25 percent of investors spend less than £1,000 on hobby investments in general, demonstrating there truly is no high-cost barrier for any individual to start diversifying their portfolios.
The study also found that overall the majority of investors are satisfied with the performance of antiques in the past year (55%) and satisfaction grows the longer the investment is held (76% over ten years). The majority of hobby investments are driven by an investor’s personal interest for the asset class – this is especially the case for antiques, where 50% of owners link their investment to personal sentiment. A further 21% say they choose to invest to build a personal collection and 16% to protect themselves from market volatility.
Markus Stadlmann, the CIO of Lloyds Private Banking says, “Often tangible assets, such as a painting or a timepiece, retain their value and are not eroded by inflation. Over the long-term, these types of assets do not closely correlate with more traditional equity and bond markets, and therefore offer diversification opportunities. Investing in something you enjoy is a great way to make your portfolio unique to you.”
But he also suggests that it's important to do research before you invest. “From the start, you must be clear on your motivation behind the investment. You must also consider all costs, including purchase, restoration, storage, upkeep, and insurance. And be sure that items have all valid documentation, to ensure that you give yourself the best change to make your pastime pay.”
When equity markets are sluggish and volatile and bond markets offer poor value, investors tend to turn to alternative investment opportunities. Investing in hobbies can be a highly profitable investment option, with one in eight investors having seen a 100 per cent return on a ‘passion’ investment according to the study.
Alternative investments are expected to see more inflows over the next ten years with antiques attracting significant amounts (1 year: £9,800, 5 years: £14,300, 10 years: £19,300). The largest investments will continue to go towards classic cars (1 year: £16,500, 5 years: £21,700, 10 years: £21,400) and watches (1 year: £12,100, 5 years: £17,500, 10 years: £19,900).