Investment doesn’t have to just be about real estate and stocks. As the number of super-wealthy people increases, the value of passion investments like collector cars has become a more significant part of investment portfolios.
Quick takeaways if you’re in a hurry:
- Investing doesn’t have to be a dry economic pursuit. Instead, making the extra effort to invest in things you’re passionate about can be rewarding both on a financial and a personal level.
- Passion investing isn’t limited to any one thing, but some great examples include collecting valuable art, antiques, and the most popular collectible investment, luxury cars.
- Global luxury spending has been trending upward rapidly for years, and investor car values have skyrocketed in the past decade.
- As emerging markets get increasingly involved in passion investing, the value of many of these rare cars and other items is set to increase even more, making this a great time to look at your options and get involved.
Investing in passion
Regular financial investment is all about growth, and economic productivity. This utilitarian approach assigns value to your investment purely on the basis of what kind of economic return it can produce.
Passion investment, on the other hand, works in a fundamentally different way. Luxury purchases like rare jewellery, art, and cars don’t work the same way as your business investments. Rather, their value is defined by their rarity, quality, and what they represent. As this value is increasingly recognised and global wealth grows, more people pursue these luxury purchases, which raises the demand and the value of those items more.
It’s not just about art
The first obvious example we tend to jump to when we think of high value passion investments is art, but that’s no reason to necessarily brush up on your own art history. Investors collect all kinds of high value luxury items, from gems, to wine, to musical instruments, to cars. The “best” choice is the one you’re most knowledgeable and passionate about and most comfortable with; it’s about expressing yourself through your investments.
The most popular and also fastest growing passion investment today is luxury collector cars. Not only have they worked as symbols of independence and power for a century, they’re also an accessible genre to investors from all over the world, which makes them extremely promising for the future.
Luxury spending is growing rapidly
As emerging markets all over the globe grow and bolster the global economy, more wealthy investors are joining the ranks of passion investors, effectively growing the demand for the same relatively finite supply of luxury items.
On the Knight Frank Luxury Investment Index, the classic cars market has grown by 17% in the last year, and by 490% over the last decade. A Ferrari 250 GTO became the most expensive car in the world in 2014, when one was sold for over $38 million. Since then, it’s been rumoured that others of the existing 39 have traded hands at or over $40 million in private transactions between individual collectors.
In 2015 investors have broken numerous records for all kinds of amazing luxury collector’s items. For example:
- Jaguar, Porsche, and McLaren all had new all-time-high prices set for their respective makes, all above $10 million.
- The Blue Moon, a fancy vivid blue diamond received a record bid for $48.4 million, making it the most highly valued gem or piece of jewellery ever in November.
- Picasso’s Women of Algiers sold for a staggering $179 million in May.
It’s a great time to get involved
There are a variety of reasons that bids on items like these break records year after year. As these items get older, their history and relevance in their respective collector community grows. Furthermore, the growing number of passion investors with an interest in these items is increasing rapidly, and not just because of growing global wealth.
Beyond simple economics, globalisation is driving a global cultural homogenisation that makes these traditionally western pursuits more accessible and more relevant to potential investors all over the world. While this process is still ongoing, we can expect the prices on the world’s most valuable collectibles to continue to rise rapidly.
Passion investing is a great way to marry your personal interests to your investment goals. If you’re not a member of the world’s super-wealthy elite, you don’t have to let that stop you. It might take $40 million to get your hands on a Ferrari 250 GTO, but you don’t have to start there. Look into the things you’re passionate about to see what kinds of investment opportunities might await within your means.