A key reason why most (62 percent) of the country’s affluent engage in hobby investing is because it is “fun,” according to new research.
BMO Private Bank, a unit of BMO Financial Group, discloses this finding in a new survey on high-net-worth Americans (those with at least $1 million in investible assets) and hobby (or passion) investing. The study, the fifth and last in a series by BMO Private Bank that examines trends among the affluent, finds that just over half of the country’s wealthy engage in some form of hobby investing.
Hobby investing is defined as adding collectible assets to one’s portfolio as a means of diversification and, just as important, as a way to have and to hold the things investors love the most.
The study found that the items in which the country’s affluent are most passionate about investing include:
- Coins (38 percent)
- Art (36 percent)
- Jewelry (31 percent)
- Antiques and stamps (28 percent each)
- Wine (25 percent)
- Classic cars and sports memorabilia (24 percent each)
“We’re finding that an increasing number of our clients are engaging in some form of hobby investing,” says BMO Private Bank Chief Investment Officer Jack Ablin. “People who choose to invest in their hobbies often do so because it allows them to feel a sense of engagement without having to spend a lot of time on them. Many hobby investors are keen to create a legacy to pass on to their heirs — one that is unique to them and reflects their interests,” he adds.
According to the study, other reasons for which the affluent engage in hobby investing included:
- Combining interests with investing (54 percent)
- Something unique to pass down to heirs (40 percent)
- Provides sound investments that will grow in value (39 percent)
- Allows one to show off my investments to others (38 per cent)
Regardless of what influences people to combine their hobbies with investing, Ablin notes that, as with any form of investing, there are a few cautionary factors Americans of all income levels need to consider. For example:
Antiques: can be very illiquid and therefore not suitable for those who may need to convert them to cash in a short period of time.
Wine and art collecting: are long-term propositions, so not appropriate for those with a short-term investing horizon.
Stamps and coins: there is a robust counterfeit market in both these items, so investors need to be careful about their authenticity and well educated about the risks.
Comic book collecting: may be trendy today, but the market may not be so strong in the long or even the medium term.
The online survey was conducted by Pollara between March 28th and April 11th, 2013 with a sample of 482 American adults who have $1M+ in investable assets.