BMO Harris Private Banking has released a study on hobby (or passion) investing and high-net worth (HNW) Canadians.
The study is the sixth and final in a series by BMO Harris Private Banking examining trends among the affluent in Canada.
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The study found that just over half of the country’s wealthy engage in some form of hobby investing (defined as adding collectible assets to their portfolios as a means of diversification and, just as important, as a way to have and to hold the things they love the most). Items in which the wealthy are most passionate about investing in include:
- Coins (22 per cent)
- Art (21 per cent)
- Antiques (20 per cent)
- Stamps (11 per cent)
- Wine (10 per cent)
- Classic cars (7 per cent)
- Sports memorabilia (6 per cent)
"Generally, we find that clients who do engage in hobby investing tend to have up to 20 per cent of their assets tied up in them," said Richard Mason, Head of Investment Management, BMO Harris Private Banking. "Investing in one’s passions enables people to be part of something that they feel strongly about without having to invest a lot of time in it. It also allows them to be able to pass on to their heirs something that reflects their personality and interests, thereby creating a legacy."
What Drives People to Engage in Hobby Investing?
The study also identified the main reasons why the country’s affluent engage in hobby investing and found that half (49 per cent) do so simply because it is "fun". Other factors identified included:
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By GlobalData- Allows me to combine my interests with investing (44 per cent)
- Provides me with something unique to pass down to my children (26 per cent)
- Provides me with sound investments that will appreciate in value (23 per cent)
- Enables me to show off my investments to others (20 per cent)
Mr. Mason noted that, regardless of what motivates people to combine their hobbies with investing, there are a few cautionary factors Canadians of all income levels need to consider depending on the particular hobby. 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 hot 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 305 Canadians with at least $1 million in investable assets. The margin of error for a probability sample of this size is +/- 5.6%, 19 times out of 20.
