Investing is always something of a gamble – but during times of political and economic upheaval, like those we’re experiencing now in South Africa, traditional investments like stocks become significantly more risky and less attractive.
Most physical or personal assets, with the exception of real estate, depreciate over time. However, there are some luxury assets that investors turn to in periods of uncertainty.
If chosen with care, these assets may weather uncertain times, continuing to appreciate and shielding owners from sudden upsets in the financial world. They may also help investors diversify their portfolios.
We consider some of the luxury assets that continue to attract investment.
Traditionally, investors turn to gold at the first sign of financial turmoil.
Buying gold coins is probably the easiest way to invest in gold. These coins have the advantage of retaining their value even when inflation renders local currency less valuable.
Of course, gold doesn’t provide a return on investment unless you sell it at a higher price than you bought it. However, it does offer security as an asset.
Because gold tends to retain value and because it’s easy to resell, having a portion of your investment portfolio in gold can act as insurance in a worst-case scenario.
Events such as the recent Knysna Car Show and upcoming Concours SA are testament to the popularity of classic cars in South Africa.
The classic car market recently outperformed other asset classes, cementing its worldwide upward trend. The Knight Frank Luxury Investment Index has shown a yearly return of 28% for classic cars and an 8% growth in the market over the last 12 months. These statistics suggest that classic cars are a more sound investment than they were in the past.
It’s a fairly safe bet to buy a car that’s already considered a classic. Trying to predict which vehicles will become classics is altogether riskier.
For a car to be an investment, it has to appreciate in value after you buy it – and this doesn’t occur even for most luxury models.
Cars that are becoming rare or approaching landmark anniversaries are potentials for investment. It takes time and effort, but keeping an eye on second-hand car prices and taking note of which prices are accelerating can give you an idea of future classics.
Digital watches aren’t generally considered investments. No matter how much you pay for an Apple Watch, for example, it’s unlikely to be considered a collectable.
In contrast, luxury mechanical watches, such as those manufactured by well-known companies like Patek Philippe or Hublot, can be excellent investments. Vintage watches, in particular, can be extremely valuable assets.
That’s not to say that a modern mechanical watch can’t be an asset. Modern diving watches boast expert craftsmanship and generally appreciate well over time.
Return on your investment might be slow, but if you’re patient, they may be significant.
The art market recovered more quickly from the last recession than traditional investments, and both classic and modern art are still considered a strong asset class in a well-diversified portfolio.
The best place to start when investing in art is to educate yourself about local artists and art trends. Pay attention to art investors in the media or speak to a financial adviser who specialises in art investment. Private wealth banks also often offer art advisory services to their clients.
Such advisers should also be able to point you to reputable art galleries. Only buy art from a gallery that is open to buying pieces back from you at a later time. The galleries you deal with need to see art as an investment – not just as stock that they need to move in order to pay the rent.
Unlocking the value of luxury assets
At lamna, we offer fast, discreet loans against a wide range of assets, including vehicles, luxury watches, gold and works of art. We store assets accepted as collateral in highly secure facilities – and once loans are repaid, we return your assets to you, in the same condition you left them.