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Portfolio > Portfolio Construction

Affluent Investors Put Their Hobbies Into Their Portfolios

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Many Americans have a hobby. If they are well off, they are likely to combine this activity with investing.

A study released last week by BMO Private Bank found that more than half of affluent Americans engaged in some form of hobby investing—sometimes called passion investing.

This involves adding collectible assets to an investment portfolio as both a means of diversification and a way to have and hold things investors love most.

BMO Private Bank found that wealthy Americans surveyed in the study were most passionate about investing in the following items:

  • Coins—38%
  • Art—36%
  • Jewelry—31%
  • Antiques—28%
  • Stamps—28%
  • Wine—25%
  • Classic cars—24%
  • Sports memorabilia—24%

“We’re finding that an increasing number of our clients are engaging in some form of hobby investing,” the bank’s chief investment officer, Jack Ablin, said in a statement.

“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.”

BMO Private Bank said the study was the last in a series examining trends among high-net-worth Americans. It was based on an online survey conducted by Pollara in the spring of 2013 with a sample of 482 American adults who had at least $1 million in investable assets.

‘Fun,’ with a Caution

Sixty-two percent of respondents said they engaged in hobby investing simply because it was “fun,” while 54% said they did so to combine their interest with investing, and 40% wanted something unique to pass on to their heirs.

Thirty-nine percent considered such investments sound, and expected them to grow in value.

Vanity motivated others respondents, with 38% saying that their hobby investing allowed them to show off their investments to others.

Albin said that regardless of why people combined their hobbies with investing, investors at all income levels needed to be aware of certain cautionary factors, the same as with any form of investing.

Antiques, for example, can be very illiquid, he said. As such, they are not suitable for those who may need to convert them to cash in a short period of time.

Likewise wine and art. These are long-term propositions, so not appropriate for those with a short-term investing horizon.

According to Albin, a robust counterfeit market exists for stamps and coins. Investors in these collectibles need to be careful about the authenticity of their purchases and well educated about the risks.

As for comic book collecting, it is trendy today, Albin said, but the market may not be so strong in the long or even the medium term.

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