Be crisis-resistant with tangible assets
We’re currently experiencing very turbulent and uncertain markets. The years-long rise of classic investment markets such as real estate, bonds, or shares seems to be over or to have come to a standstill. Investors who have already suffered painful losses are rightly asking themselves what can be done to protect their portfolios against worsening crises and a further rise in inflation.
The solution is a broad diversification of your portfolio, with an increased focus on tangible assets and alternative investments. Discover why real assets and alternative investments can be an essential anchor in stormy times.
Tangible assets — security for one's portfolio
In recent years, there has been almost only one direction for asset classes — steeply upwards. Regardless of whether this is in real estate, shares, or cryptocurrencies. Those who invested enjoyed amazing returns.
Recently, however, the rewards have slowed down. War, inflation, and fluctuating markets have strained many portfolios—especially the ones lacking diversification. In principle, you must look at your portfolio from the perspective of the different monetary and tangible assets. This is because one either invests in purely monetary assets such as building savings, insurance, etc., or tangible assets such as gold, real estate, and luxury items. A balanced portfolio must take this distribution into account if it’s going to be crisis-resistant.
The strengths and weaknesses of money assets
The past decades with low inflation and high-interest rates have shown investments in money assets can be quite lucrative. However, with the massive drop in interest rates and the simultaneous rise in inflation, people are suffering major losses. For instance, if your insurance pays 2% interest, but inflation is 10%, this results in a loss of 8%. You receive 8% fewer services or products for the same amount.
If your portfolio is 100% invested in monetary assets, the losses in purchasing power are enormous. After all, investing is about building up real wealth and maintaining or, in the best case, increasing purchasing power. This is difficult with monetary assets, even though the international central banks have raised interest rates.
Real assets and alternative investments are the solutions
If you want to cheat inflation, invest in tangible assets. Shares are also tangible assets, as they securitise shares in companies. The question is, therefore, which companies can profit from an increase in inflation?
There are the classics like gold which is considered a haven in this sector and an antithesis to monetary assets. But here, too, investors have to deal with price fluctuations. Real estate has also risen enormously in recent years and decades, and a price correction seems inevitable. So what’s left? Investing in luxury and rarities (for starters).
Performances of different asset classes
Consider a worst-case scenario: anyone who invested their entire fortune in Bitcoin a year and a half ago was faced with a loss of 80% of their invested capital. The NASDAQ 100, which unites the most important American tech stocks, developed minus 16% within one year. The gold price in euros gained almost 10% in the same period. These three examples show how important it’s to have a well-thought-out portfolio diversification.
Each asset class has different periods in which it can play to its strengths. For example, it was a good idea to buy a few Bitcoins in 2009 to achieve a return of several million percent by the time it reached its peak. However, don’t expect the same results now. And that’s why a well-thought-out plan to diversify your portfolio goes a long way. After all, things could have turned out differently, as the past year shows well.
The performance of luxury real assets and alternative investments
Investors who don’t place their bets all in one place can sleep most soundly. Tangible assets and alternative investments are particularly suitable as a basis for building up assets. Why? Because their value is more stable and their price development is more sluggish than shares. A Hermès handbag, which could be invested in through Split Invests’ buying syndicate, has shown a constant increase in value of approx. 14.2% since 1985.
Another critical point is fluctuations in stable, tangible assets are usually much smaller because the markets are more liquid and the supply is smaller. A Rolex Daytona even shows an average appreciation of almost 38% in recent years.
When it comes to luxury items of well-known brands, price increases due to inflation can be passed on more easily to a wealthy clientele. So, investors may even profit from a pick-up in inflation.
Profiting from luxury tangible assets without a 100,000 euro budget
Stocking your portfolio with noble and rare tangible assets is a smart move. However, the financial hurdle isn’t surmountable for most investors. After all, you must pay 100,000 euros or more to obtain an investment object in the watch segment. Additionally, you need expert knowledge to recognise where to invest or not.
At Splint Invest, we’ve found an elegant solution to both problems with our buying syndicate. For as little as 50 euros, you can invest in objects selected by wine, watches, spirits, handbags, and art experts. Using our intuitive app to conveniently build a high-quality and individual tangible asset portfolio that stabilises your portfolio.