BMO Private Bank has released the results of a study 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 examining trends among the affluent, found that just over half of the country’s wealthy engage in some form of hobby investing.
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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," said Jack Ablin, Chief Investment Officer, BMO Private Bank. "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."
Why do People Engage in Hobby Investing?
According to the study, one of the main reasons why the country’s affluent engage in hobby investing is simply because it is "fun" (62 percent). Other reasons included:
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By GlobalData- 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 percent)
Regardless of what influences people to combine their hobbies with investing, Mr. Ablin noted 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. The margin of error for a probability sample of this size is ± 4.5%, 19 times out of 20.
