Want to diversify your portfolio? Investing in commodities is a great start. The complexities and nuances surrounding the plethora of commodity options, or hard assets, is generally what makes people run for the hills.
However, it’s that you have all these options that make it so easy to diversify with hard assets. There’s virtually something to appeal to everyone. Here are seven hard assets investments with a proven track record to retain capital and appreciate during inflation and uncertain times.
Silver, whether that be coins or jewelry, holds appeal as a precious metal. While more volatile than gold’s pricing, it’s a worthy hedge against inflation. Its price is closely tied into the economic cycle, with the ability to appreciate during prosperous and uncertain times. Why? It’s both a luxury and necessity. The widespread industrial, medical, and electronic uses of silver makes it a hard asset that will never fade into the fad category.
It’s a precious metal that’s withstood the trials of time and lived to tell the tale. Since 2000 alone, gold has appreciated over 500%. It’s perhaps the best hedge against inflation. Whether it’s a gold bar, gold coins, or gold jewelry, this hard asset has been a favorite for investors to all but ensure they preserve capital and still have the potential for an upside. It’s easy to store, avoids future contracts, and allows indirect equity through the use of mining companies.
Another precious metal with inflation fighting super powers. Jewelry, industrial, and electronic uses ensure platinum is around for the long haul. Plus, since it’s concentration is so predominant within emerging countries, price spikes can happen at any time. Another caveat is the potential for the rare platinum to one day take the place of paper currency if people continue to lose faith. Overall, it’s a viable hard asset option for capital preservation with growth potential.
These little pieces of paper may appear worthless and certainly aren’t as shiny as precious metals, but they’re one of the most sought after collectibles in the world. The value stems from the universal belief that they’re valuable. Studies are actually showing these tiny slivers of paper could rival precious metals with annualized returns averaging seven percent.
Few collectibles can tout that number. The hedge is partial against inflation with historical returns similar to gold. Not a bad hard asset to have in your portfolio.
5. Classic Cars
Luxury goods that can be used as they retain or appreciate in value. That’s the appeal. Again, the value is in a consensus of psychological thought that certain vehicles have a more long-term and higher value than others. Sometimes this value is based upon brand recognition and sometimes it’s a matter of limited supply.
The important part is understanding the cost of maintenance and restoration compared to value and demand, which is the models consistently wanted by collectors. When purchased wisely, the classic car is still there generating impressive returns, regardless of market conditions.
Over the last 30 years, the 50 key collective classic cars have increased 30 times, which amounts to a growth rate of 12% annually, according to HAGI Top Index. In 2011, gold had a 10% gain… meanwhile, there was a 20% gain in certain segments of the classic car market.
6. Antique Guns
The market has seen a steady rise in commercial and collectable gun purchases over recent years. This partly stems from fear of stricter gun control laws being implemented, in particular a federal assault weapons ban.
This would mean banned assault weapons could no longer be manufactured, leaving the circulation purely upon those already in existence through private ownership. Gun pricing is reflected of supply, demand, and speculation. Such supply restrictions would significantly raise the value of this hard asset. Bans, however, are not the only value in the gun category.
Collectible firearms have became a capital preservation tool while the stock market was at its most volatile points in recent history. English shotguns, for example, have valuations rising up to 5% per year.
Last but not least is property as a hard asset, in particular farmland. No doubt that this is more involved than buying a piece of jewelry or a gun, but the payout can also be more extensive, too.
Food demands are being driven by population surges in booming emerging markets across Latin America and Asia. Farmland prices have appreciated as the agricultural industry has expanded to meet the growing needs of this growing world population.
From 1987 to 2004, farmland prices averaged 4.8% increases annually. Low interest rates in the past few years have spurred this growth even higher, with 2004-2008 showing 15% annual gains.
While experts have pointed out that such land value gains aren’t sustainable, they’ve also recognized the demand (population increase) isn’t likely slowing down any time soon to cause a collapse.