Nowadays, investors are increasingly seeking tangible assets as a hedge against volatility in financial markets. Real assets, which encompass physical properties and commodities, offer a level of security and stability that paper assets often can’t match. In this article, we’ll check out the best tangible investments, exploring the various options available and highlighting their potential returns.
Why tangible investments?
Tangible investments are assets you can touch, feel, and see. Unlike stocks or bonds, which are intangible and subject to market whims, tangible investments provide a sense of security because they have inherent value. Here’s why they’re appealing:
- Tangibility: You own something physical, which can’t disappear overnight like stock value;
- Intrinsic value: Many tangible assets have inherent value due to their utility or scarcity;
- Diversification: Tangible investments offer diversification from traditional financial assets, reducing overall portfolio risk;
- Inflation hedge: Some tangible assets, like real estate and precious metals, tend to retain value or even appreciate during inflationary periods.
What is the best tangible investment?
Some of the best tangible investments include:
- Real estate;
- Precious metals;
- Commodities;
- Collectibles.
Now let’s look at each investment in more detail.
Real estate
Real estate is one of the most popular tangible investments, offering multiple avenues for profit. Whether it’s residential properties, commercial buildings, or farmland, real estate can provide steady rental income, capital appreciation, and tax benefits.
Pros of real estate investments:
- Steady income: Rental properties can generate consistent cash flow;
- Appreciation: Properties often appreciate over time, increasing their value;
- Leverage: Real estate allows investors to use leverage, amplifying returns;
- Tax benefits: Deductions for mortgage interest, depreciation, and property taxes can reduce tax liabilities.
Precious metals
Investing in precious metals like gold, silver, platinum, and palladium has been a traditional hedge against economic uncertainty and inflation. These metals have intrinsic value and are seen as a store of wealth.
Pros of precious metals investments:
- Safe haven: Precious metals tend to perform well during economic crises;
- Inflation hedge: They often retain their value or appreciate during periods of high inflation;
- Portfolio diversification: Precious metals have a low correlation with other asset classes, reducing overall portfolio risk.
Commodities
Commodities encompass a wide range of tangible goods such as oil, natural gas, agricultural products, and metals. Investing in commodities can provide diversification and opportunities for profit, but it requires an understanding of supply and demand dynamics.
Pros of commodities investments:
- Diversification: Commodities offer diversification benefits, as they don’t necessarily move in tandem with stocks and bonds;
- Inflation protection: Some commodities, like oil and gold, tend to perform well during inflationary periods;
- Global demand: Demand for commodities often stems from global economic growth, providing opportunities for profit.
Collectibles
Collectibles like art, wine, rare coins, and vintage cars, can also be valuable tangible investments. Their value typically depends on factors like rarity, condition, and historical significance.
Pros of collectibles investments:
- Potential for high returns: Rare collectibles can appreciate significantly over time;
- Tangible enjoyment: Collectibles can provide aesthetic enjoyment in addition to financial returns;
- Diversification: Investing in collectibles can diversify your portfolio beyond traditional assets.
What to consider before investing
Before diving into tangible investments, it’s crucial to consider a few key factors that can impact your investment experience and outcomes.
Liquidity
Unlike stocks or bonds, tangible assets can be less liquid, meaning they may not be easily converted into cash. Before investing, you should consider the time and effort required to sell the asset if needed.
Storage and maintenance
Some tangible assets, like real estate or collectibles, require ongoing maintenance and storage costs. Factor these expenses into your investment decision to ensure they don’t erode your returns.
Market conditions
The performance of tangible assets can be influenced by various market factors, including supply and demand dynamics, geopolitical events, and economic conditions. Stay informed about market trends and make investment decisions accordingly.
Risk management
While tangible investments offer diversification benefits, they’re not immune to risk. As such, you should conduct thorough research, diversify your portfolio, and even consider consulting with financial advisors to mitigate risk.
| Investment | Average annual return |
| Real estate | 8-12% |
| Gold | 6-10% |
| S&P GSCI (commodities index) | 4-6% |
| Art | 5-9% |
Is it good to invest in tangible assets?
The best tangible investments offer a way to diversify your portfolio and hedge against market volatility. Whether it’s real estate, precious metals, commodities, or collectibles, these assets provide stability, potential for growth, and protection against inflation.
However, it’s essential to conduct thorough research, consider the risks, and align your investments with your financial goals and risk tolerance. By incorporating these tangible assets into your investment strategy, you can build a more resilient and balanced portfolio for the long term.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
