Collectibles Lag Equities

Ted

FYI:
The European academics found that between 1900 and 2012, art, stamps and violins underperformed the equity markets by a wide margin. Stocks posted real returns of 5.2% annually, while art, stamps, wine, diamonds and violins eked out between 2.4% and 2.8%, even though there were periods, such as in the inflationary 1970s, when such passion collectibles shot up in value. The good news for collectors, according to the academics, is that collectibles did beat fixed income and gold during the same period.
Regards,
Ted
http://blogs.barrons.com/penta/2014/07/25/collectibles-lag-equities/tab/print/

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rono

Hi Doc, Mo,

Hope you and yours are both doing well.

These figures don't surprise me at all. Equities are always where the good gains lie. Collectibles, as they were, are more of a wealth preservation hedge.

I still go back to the elder Baron Rothschild saying that to be safe, one should have 1/3 of their wealth in securities, 1/3 in real estate and 1/3 in 'rare art'. We'll call rare art = collectibles. I'm good with this. Gees, i's been 7-8 years since I first read this and I'm still not at 33/33/33. That's OK. I'm close enough that it really doesn't matter much on the margin.

No one has shown me a better plan.

peace,

rono

JohnChisum

Good to see ya here Rono.

Did the Baron come up with those numbers on the basis of preserving the critical mass of which he had attained?

rjb112

rono said:

I still go back to the elder Baron Rothschild saying that to be safe, one should have 1/3 of their wealth in securities, 1/3 in real estate and 1/3 in 'rare art'. We'll call rare art = collectibles. I'm good with this. Gees, i's been 7-8 years since I first read this and I'm still not at 33/33/33. That's OK. I'm close enough that it really doesn't matter much on the margin.

No one has shown me a better plan.

peace,

rono

For those who don't own any real estate, do you all think REIT mutual funds are a good substitute?

JohnChisum

A direct substitute? Maybe not. They have done well though. I have ARYVX and I am very pleased with it.

scott

rjb112 said:

rono said:

For those who don't own any real estate, do you all think REIT mutual funds are a good substitute?

I'll agree with the post above - they are not an apples-to-apples substitute, but I think they are a good, easily accessible (and liquid, whereas owning real estate is rather illiquid) alternative. You can also reinvest dividends with a REIT.

In some instances/ways, REITs may be better,but no guarantees/past results do not suggest future performance.

Interesting article from Canada:
http://www.theglobeandmail.com/globe-investor/investment-ideas/why-buying-a-reit-is-more-profitable-than-a-condo/article1322188/

JohnChisum

With real estate you get property taxes, upkeep, insurance, and in the case of rentals bad tenants. REITs don't have those worries.

rjb112

Of course, the big disadvantage with REITS is that you are investing in the stock market. Whereas one of the main attractions of real estate is getting an alternative asset class to stocks and bonds.

scott

rjb112 said:

Of course, the big disadvantage with REITS is that you are investing in the stock market. Whereas one of the main attractions of real estate is getting an alternative asset class to stocks and bonds.

That is true, although I think they're both risk assets and are going to move South if things go South. Although owning both provides some diversification, the REIT is at least a very liquid asset whereas the real estate is not.

It's almost difficult to consider real estate an investment at this point, or at least maybe that should not be the focus/priority that much anymore. My only thought about real estate is this: I think what works over the next 10 years is convenience. Close to transit and amenities (grocery, etc.) This whole thing of houses in the middle of nowhere where you have to drive to do anything will be less appealing, especially if energy prices stay around these levels or head much higher. Other than that, who knows what house prices will do over the next decade.