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How To Diversify Your Portfolio

07.03.24

Rising Alternative Investments: How Retail Investors Shield Their Portfolio from Inflation

In a world where traditional investments often offer uncertain returns; more and more investors are turning to alternative assets. Luxury watches, cars, whiskey, wine, Lego, and art are just some of the areas that have experienced a boom in recent years.

Those assets are not a novelty for the ultra-rich: Among ultra-high-net-worth investors (those with a net worth of at least $30 million), alternative investments make up 50% of assets, compared to just 5% for the average investor. Moreover, the market is actively growing: alternative investment assets under management totaled $13.7 trillion in 2021 and are projected to reach $23.3 trillion by 2027, according to investment data company Preqin.

Why do these investments become so popular?

Investing in alternative assets might offer:
- attractive net returns, that might outperform S&P 500
- Hedge against inflation due to low correlation to traditional markets such as stocks or bonds.
- Ease of access with fractional investments: historically alternative assets had a high entry barrier (only a few rich might afford investing in a Picasso), but now with the regulations being in place, retails investors could invest as little as 50 EUR.
For example, if you invest in a masterpiece by an established artist, you might expect still an attractive return – e.g. see the estimation example for “Hidden Faces” by Salvador Dali

Performance across different alternative investment categories

The performance of alternative investments in various categories reflects the diversity and dynamism of this burgeoning market. Here are some updates from 2023:

Art: The indexed art portfolio achieved the strongest performance among all asset classes with an increase of nearly 26% in 2023. Dutch painter Albert Willem's works dominate the top of the portfolio, with impressive increases of 33% and 24% in individual pieces. The Artprice index for prints by Andy Warhol rose by 22% in 2023, and prints by Keith Haring even saw an impressive 51% increase.

Whisky: There was a 5.5% increase in indexed whiskey bottle prices. But some assets – like the rare Irish whiskey "The Devil's Keep" secured an astonishing 24% increase.

Watch: watches experienced a slight price decline in 2023, interpreted as a healthy correction following the previous boom in the luxury watch market. The indexed performance of this category stands at -4.1%. According to experts, this correction provides a good entry opportunity for investing in luxury watches.

Classic cars: According to the Knight Frank 2023 Index, vintage cars have shown a remarkable appreciation of 118% over the past ten years. This impressive development demonstrates that investments in selected luxury goods can yield attractive returns.

You can see the performance of 8 different alternative asset categories in 2023 below, as well as aggregated portfolio dynamics of Splint Invest – our partner who helps retail investors in UK, EU and Switzerland to diversify their portfolio with alternative investments, starting as little as 50 EUR.

How to start diversifying your portfolio with alternative investments?

Surely, there are caveats you need to consider before investing in alternatives: How to choose the right asset? How to verify its authenticity and condition? Where do I store it?
That’s why, while ultra-rich invests in alternatives directly, retail investors rely on the help of professional experts and platforms that handle all the problems mentioned above.

Splint invest is a registered financial institution in Switzerland. Their experts are constantly looking for the best alternative assets in over 10 different categories and handles all the questions from valuation to storage and insurance. All you need to do is download the app, create an account in 2 mins and choose which assets to invest in from the curated list. Moreover, for Abode2 readers we prepared a special gift – EUR 60 welcome bonus with the code “Abode2”. To redeem the code, download the app and enter the code there until June 1st, 2024.

Happy diversification!

https://splintinvest.com/en/

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