Wine

More than half of HNW Americans engage in hobby investing

Fri, 18/07/2014 - 14:03

Just over half of high-net-worth Americans – those with at least USD1 million in investable assets – engage in some form of hobby investing, according to a study by BMO Private Bank.

Hobby – or passion – investing is defined as adding collectible assets to one's portfolio as a means of diversification and as a way to have and to hold the things investors love the most.
 
The study found that the items in which the country's affluent are most passionate about investing include:
•             Coins (38 per cent)
•             Art (36 per cent)
•             Jewellery (31 per cent)
•             Antiques and stamps (28 per cent each)
•             Wine (25 per cent)
•             Classic cars and sports memorabilia (24 per cent each)
 
"We're finding that an increasing number of our clients are engaging in some form of hobby investing," says Jack Ablin, chief investment officer, BMO Private Bank. "People who choose to invest in their hobbies often do so because it allows them to feel a sense of engagement without having to spend a lot of time on them. Many hobby investors are keen to create a legacy to pass on to their heirs -- one that is unique to them and reflects their interests."
 
According to the study, one of the main reasons why the country's affluent engage in hobby investing is simply because it is "fun" (62 per cent). Other reasons included:
•             Combining interests with investing (54 per cent)
•             Something unique to pass down to heirs (40 per cent)
•             Provides sound investments that will grow in value (39 per cent)
•             Allows one to show off my investments to others (38 per cent)
 
Regardless of what influences people to combine their hobbies with investing, Ablin notes that, as with any form of investing, there are a few cautionary factors Americans of all income levels need to consider. For example:
 

  • Antiques: can be very illiquid and therefore not suitable for those who may need to convert them to cash in a short period of time. 

  • Wine and art collecting: are long-term propositions, so not appropriate for those with a short-term investing horizon. 

  • Stamps and coins: there is a robust counterfeit market in both these items, so investors need to be careful about their authenticity and well educated about the risks.

  • Comic book collecting: may be trendy today, but the market may not be so strong in the long or even the medium term.

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