Luxury bags, collectibles, and crypto are going mainstream as alternative investments surge - exciting but volatile, and not for the unprepared.
What if luxury handbags and rare sneakers were considered an “investment”? Not just because they cost a small fortune, but because they have legit monetary value in the resale market.
When people talk about investing they’re often referring to traditional stocks and ETFs, but alternative investments are a growing asset class that’s forecasted to increase by another 60% over the next five years.
Anything that’s NOT shares, bonds, and cash!
As the name might suggest, the ‘alternative investment’ category is quite broad and covers everything from real estate, infrastructure, crypto, collectibles, private equity, art, natural resources, hedge funds, luxury bags, and the list goes on…
Think of it like a fun side dish to the main course (stocks, bonds and cash) of investing. Or for some people, alternative investments might even be the main course…
For decades, alternative investments have been the financial equivalent of a speakeasy bar. It’s been quite hidden, definitely exclusive and only accessible if you knew the right people or had the right balance in your account.
The more complex alternative investments like infrastructure, hedge funds and private equity are often managed by institutional investors (i.e. big companies that manage money on behalf of investors) or high net worth individuals.
And no surprise, there tends to be a high minimum investment and upfront fees, which make it difficult for the everyday investor to get involved.
Even the more accessible alternative investments like rare luxury handbags and art collectibles have a higher price point - because its exclusiveness is what makes it valuable.
But that world is shifting. Collectibles are going mainstream, crypto has kicked down the door and even super funds are loading up on alternatives.
For example, Hostplus has the highest percentage allocation to alternative investments, while AustralianSuper has the most money invested in this asset class.
Like with any investment though, alternative investments carry risk.
Public markets that trade in shares, bonds and cash are heavily regulated and operate on standards that are made publicly available. On the other hand, alternative investments are often traded privately which means there are fewer regulations in place to protect the investor.
On top of that, these investments also tend to be less liquid because there's no readily available market to trade on, and sometimes the investment itself (e.g. angel investing in a new start up) might require a longer time horizon to yield positive returns.
Both of these mean the value of alternative assets can be extremely volatile. And the value of more obscure assets like collectibles and rare art can sometimes be driven by hype - which disappears as quickly as it arrives!
So you might want to wait a while before adding your Labubu and rare Pokemon card to your net worth…
So while alternative investments can be an exciting option for investors with the right experience and research, always remember to diversify your portfolio and have a steady foundation to work with!
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