The richer you are, the richer you get…
You see, U.S. laws bar non-rich people from some of the most lucrative investments in the world.
Take private placements, for example.
Over the last 20 years, the biggest companies in the world by market value have come out of the private market—like Facebook, Lyft, and Uber.
But the biggest beneficiaries have been private stockholders who got in early.
And until recently, you had to be a millionaire (an “accredited” investor), to buy into these lucrative private investments.
Even the investments not barred by regulations are so expensive that they might as well be off-limits to the little guy.
But in the Daily, we’re always looking for ways to level the playing field between the rich and the not-yet-rich.
For instance, we recently uncovered a legal loophole allowing non-accredited investors to invest in private companies—just like the wealthy do.
And in today’s essay, we’ll show you another secret of the wealthy: How to build your own investment-grade portfolio of collectibles…
The Most Exclusive Assets in the World
Regular readers know we follow an asset allocation model at PBRG. You see, a broadly diversified portfolio has lower risk and higher return potential.
In fact, over the past eight years, editor Teeka Tiwari’s Palm Beach Letter has returned an average of 125.1% per year. Over the same span, the S&P 500 returned only 11.7% per year.
That’s not a typo. The PBL portfolio has done 10 times better than the S&P 500—with much less risk. And that includes all 139 winners and losers since 2011. No cherry-picking.
This outperformance is largely due to our asset diversification (owning cryptos, stocks, metals, etc.). And in our asset allocation model, we allocate 5% to collectibles.
That might not seem like much… But Teeka says collectibles like vintage cars are one of the best-performing assets in the world:
Millionaires and celebrities have been enjoying and profiting from them for years…
Since 2005, the S&P 500 is up 145%… Yet during that same span, Südwestbank’s OTX Classic Car Index quadrupled—giving investors a 300% return. That would’ve turned $5,000 in $20,000.
And from 2007 to 2017, the classic car component of the Knight Frank Luxury Investment Index returned 334%. The S&P 500 gained just 82% during that time. Even last year—when almost all asset classes lost money—the HAGI Top Index for rare classic cars was up 2.5%.
Classic cars have risen in value for the last 30 years. And during the 2008 financial crisis, the smart money flowed into this safe-haven asset.
That’s because collectibles like classic cars are uncorrelated to other assets. They’re hard assets that maintain their value—which is why they’re part of our PBRG asset allocation model.
Teeka’s not the only collector in the PBRG franchise, either. Cofounder Mark Ford has spent over three decades collecting art…
The Five Rules
Like many beginners, Mark was passionate about the idea of owning art. But he had no clue how to develop a financially valuable collection.
So over his years as a successful art dealer, he’s developed five timeless rules for building a quality collection:
Don’t buy on impulse. First impressions can be deceiving. You can’t know whether a piece will “hold up” (sustain your interest) unless you’ve looked at it several times and thought about it in between.
Not all collectibles are created equal. Some art is very good… some art is not so good… and some art is downright terrible. Likewise, as an investment, some art is very valuable… some art is less so… and some art is worthless.
Only buy investment-grade collectibles. For most, art is all about beauty. But pieces selling for tens of millions of dollars aren’t necessarily valuable for their beauty. They’re valuable because their artists made their way into art magazines… better galleries… smaller museums… bigger museums… and then finally into art history books. You see, predicting what will be historically valuable is much easier than predicting what will be considered beautiful in the future. So think about future historical value—rather than just aesthetics—when buying art. You’ll have a better chance of developing a valuable collection.
Buy unique pieces. Buy original pieces by established masters.
Buy the best pieces you can afford—then, trade up. Gradually sell off the mediocre pieces in your collection and use the proceeds to buy ones likely to give you a higher return on investment. (Mark also uses this strategy with his real estate properties.)
These universal rules apply to any investment-grade collectible—including antique furniture, classic cars, baseball cards, or even surfboards.
And if you apply them correctly, they’ll help you build a secondary investment portfolio to fund your retirement… protect you from inflation… insure you against economic or political instability… and provide a lasting legacy for your heirs or a charity of your choice.
Managing Editor, Palm Beach Daily
P.S. As I mentioned above, collecting fine art used to be a rich man’s game.
But Teeka’s found a way for ordinary folks to get in on collectibles like classic cars for as little as $50—without any of the hassles of titles, tags, insurance, and storage.
Plus, he’ll show you how to invest in other highly profitable alternative assets like cryptocurrencies, artwork, and even barrels of whisky.
Do you already collect fine art or cars? Or maybe you plan on starting your own wine collection soon. Even if you don’t, let us know what your favorite collectibles are right here.