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Collecting Equities Can Pay Off

30 April 2019

Combining one’s passion with one’s investment strategy may get some investors excited but it hasn’t turned out to be the most lucrative approach in recent years, even for the very wealthy who make up the predominant investors in collectibles. While sometimes amassing art or vintage cars, for example, can reap valuable gains, investing in equities in the U.S. during the past 10 years has proven substantially more profitable.

Equities Have Eclipsed Other Investments over the Past 10 Years

  • Since the current U.S. bull market began, equities have outperformed several alternative investments by a wide margin. Some may perceive that these opportunities—mostly available to the very wealthy— are worthwhile but even New York real estate has not outperformed the S&P 500 in the last 10 years.
  • A primary issue in buying high end alternative assets is their illiquid nature. Stocks can often be sold in a matter of seconds but unloading a car or a work of art at an attractive price can take an indefinable length of time.
  • Additionally, collectibles have their own cycles with demand fluctuating over longer periods, exacerbating the difficulty of selling collectibles at a profit.
  • Collectibles are not tax advantaged in the U.S. either. They frequently entail larger capital gains taxes than stocks.
  • Although diversifying a portfolio with tangible assets may sound promising, it may only make sense for the extremely wealthy who can afford very long holding periods and the risk of selling at a loss.
    However, investing in stocks is accessible and has yielded impressive long-term results compared to other options.

 

 

 

The S&P 500 Index is a market capitalization-weighted index of the 500 largest U.S. public traded companies.
The HAGI TOP Index is the Historic Automobile Group International’s overall market measure for exceptional historic automobiles.
The AMR All Art Index is Art Market Research’s measure of market sentiment for a wide range of art, antiques and collectibles traded at auction since 1975.
The Liv-Ex Fine Wine 100 Index is Liv-Ex’s representation of the price movement of 100 of the most sought after fine wines on the secondary market.
Keeneland is an internationally renowned racecourse and the thoroughbred industry’s leading auction house.
The S&P/Case-Shiller New York Home Price Index measures the average change in value of residential real estate in New York given a constant level of quality.
The indices presented above serve as proxies for their related industries. Note that comparison to different indices might have materially different results than those shown.
The views expressed are the views of Fred Alger Management, Inc. as of April 2019. These views are subject to change at any time and they do not guarantee the future performance of the markets, any security or any funds managed by Fred Alger Management, Inc. These views are not meant to provide investment advice and should not be considered a recommendation to purchase or sell securities.
This document is directed at investment professionals and qualified investors (as defined by MiFID/FCA regulations). It is for information purposes only and has been prepared and is made available for the benefit of investors. This document does not constitute an offer or solicitation to any person in any jurisdiction in which it is not authorised or permitted, or to anyone who would be an unlawful recipient, and is only intended for use by original recipients and addressees. The original recipient is solely responsible for any actions in further distributing this document and should be satisfied in doing so that there is no breach of local legislation or regulation. This
document is not for distribution in the United States. Any opinions expressed herein are those at the date this material is issued. Data, models and other statistics are sourced from our own records, unless otherwise stated
herein. We caution that the value of investments in discretionary accounts, and the income derived, may fluctuate and it is possible that an investor may incur losses, including a loss of the principal invested. Investors should ensure that they fully understand the risks associated with investing and should consider their own investment objectives and risk tolerance levels. Past performance is not indicative of future performance. Investors whose reference currency differs from that in which the underlying assets are invested may be subject to exchange rate movements that alter the value of their investments.
Certain products may be subject to restrictions with regard to certain persons or in certain countries under national regulations applicable to such persons or countries. NOTABLY, THIS MATERIAL IS EXCLUSIVELY INTENDED FOR PERSONS WHO ARE NOT U.S. PERSONS, AS SUCH TERM IS DEFINED IN REGULATIONS OF THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT) AND WHO ARE NOT PHYSICALLY PRESENT IN THE UNITED STATES.
Risk Disclosures: Investing in the stock market involves gains and losses and may not be suitable for all investors.
Important Information for All Investors: Alger Management, Ltd. (company house number 8634056, domiciled at 78 Brook Street, London W1K 5EF, UK) is authorised and regulated by the Financial Conduct Authority, for the distribution of regulated financial products and services. FAM and/or Weatherbie Capital, LLC, U.S. registered investment advisors, serve as sub-portfolio manager to financial products distributed by Alger Management, Ltd.
Fred Alger & Company, Incorporated (parent company of FAM), is not an authorized person for the purposes of the Financial Services and Markets Act 2000 of the United Kingdom (“FSMA”) and this material has not been approved by an authorized person for the purposes of Section 21(2)(b) of the FSMA.
Important Information for UK Investors: The distribution of this material in the United Kingdom is restricted by law. Accordingly, this matertial is provided only for and is directed only at persons in the United Kingdom reasonably believed to be of a kind to whom such promotions may be communicated by an unauthorized person pursuant to an exemption under the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “FPO”). Such persons include: (a) persons having professional experience in matters relating to investments and (b) high net worth bodies corporate, partnerships, unincorporated associations, trusts, etc. falling within Article 49 of the FPO. Most of the rules made under the FSMA for the protection of retail clients do not apply, and compensation under the United Kingdom Financial Services Compensation Scheme will not be available.

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