Diversify Your Assets With Quiet Wealth Collectibles

Diversify your portfolio with collectibles

Talk about a million-dollar idea…

Earlier this month, a handwritten notebook once owned by Alan Turing, the British mathematician who broke the Nazi’s famous Enigma code, sold at auction for $1 million. A few days earlier, the musical manuscript to Don McLean’s 1970s anthem, “American Pie,” sold for $1.2 million. Last June, the manuscript to Bob Dylan’s “Like a Rolling Stone” fetched $2 million.

Ideas, of course, have always been the inspiration for millions of dollars in profits. But as these auctions show, the genesis of the ideas themselves — the words and images scribbled down by the authors — can be worth a great deal, too.

And that is what I want to share with you today: investment opportunities in assets other than the traditional stocks, bonds and other financial instruments.

I am an avid collector. I have a stash of investment-grade gold and silver coins — and U.S. paper currency — dating to the late 19th century. I have mint-condition baseball and hockey cards going back into the 1960s. I have investment-grade, non-sports collectible cards and stickers. I have a few thousand comic books from the 1960s through today. And just recently, a friend got me started collecting old music posters from the ‘60s and ‘70s that announced the bands playing at venues like San Francisco’s famed Fillmore Auditorium.

Such assets are what I call “Quiet Wealth” — the assets you can quietly pass from one generation to the next without the financial constraints of traditional assets.

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Valuable Assets in Strong Hands

The world is filled with Quiet Wealth collectibles, from the obvious (art and antiques) to the obscure (Wacky Packages stickers from the 1970s and old lunchboxes). No matter your interest, you’ll find the niche well served. And with the rise of the Internet, you’ll find a ready market of buyers and sellers for just about every kind of collectible. One small example: ComicConnect.com has nearly 70,000 comic books up for auction at the moment, and it’s only one of a few comic-book auction sites out there.

Better still, each class of collectible has demonstrated strong and consistent price appreciation over time, reflecting the fact that Quiet Wealth collectibles are widely seen an accepted store of value.

Outside of bubble moments, they also tend to be stable investments. Because these assets are, first and foremost, collectibles, the largest base of owners tends to be, well, collectors. Those are “strong hands” — meaning that because they spend years building their collections, they’re not likely to wholesale dump their collections in periods of economic upset.

Strong hands give collectible assets a certain degree of price stability, even when the rest of the investment universe seems to be falling apart. Though prices do fall off in periods of economic malaise, they tend not to crater. The Liv-ex Fine Wine Index, as tracked by Bloomberg, is a good example. It essentially flat-lined during the global financial crisis, and then quickly bounded higher.

Joy & Diversification in One Tidy Package

I began stashing away Quiet Wealth collectibles for two reasons:

First, it’s a way for me to reconnect with the items that remind me of the joys of my youth. In that regard, I reflect collectors universally, which helps underscore the strong-hands thesis. I’m not willing to part with these after spending so much time finding and gathering them into a collection.

Second, I recognize their wealth-preservation characteristics, and the fact that they are highly uncorrelated with traditional financial assets, meaning their prices move independently of the financial markets. In that regard, they are an asset-diversification tool that moves me away from singularly relying on stocks, bonds, currencies and the like for my financial well-being.

And if nothing else, I see an opportunity to quietly pass these assets to my heirs one day, bypassing many of the issues associated with passing along financial assets.

I don’t know why the collectors bought Alan Turing’s manuscript or Don McLean’s hand-written song lyrics. But given the seven-figure value those buyers placed on those assets, I have to think it’s because they, too, see that non-traditional assets are a useful way of diversifying an overall portfolio — plus, they’re just fun to collect.

Until next time, stay Sovereign…

Jeff D. Opdyke
Editor, Profit Seeker