As 2017 departs and 2018 arrives, it makes sense for those interested in alternative assets to reassess their financial situation and make these smart moves. So here is the Antique Sage’s 2018 to do list for alternative asset investors:
Rebalance your portfolio from conventional assets to alternative assets
The paper asset markets have had a tremendous bull market run over the past 9 years. So there is every probability that the stocks, bonds and mutual funds in your retirement or brokerage account are worth far more than they were just a few short years ago.
So now is the perfect time for you to take a little of your winnings off the table. Sell some of your stocks and bonds and reallocate the proceeds into an asset class that hasn’t performed as well. Of course, there are very few asset classes that haven’t performed well recently.
But there is one asset class that was completely overlooked in 2017: bullion, fine art and antiques have lagged substantially behind. In my opinion, this makes them perfect for alternative asset investors in 2018. Their prices are low and their valuations are reasonable. A move from traditional paper assets like stocks and bonds into fine art and antiques would simultaneously de-risk your portfolio while improving future return potential.
Don’t buy into the crypto-currency hype
Alternative asset investors may be sorely tempting to throw their money at those alternative asset niches that have done the best in 2017. In this case, I’m referring to the crypto-currency complex.
Most crypto-currencies, including such illustrious participants as Bitcoin, Ethereum, Litecoin and Ripple, absolutely skyrocketed during 2017. Bitcoin went from about $1,000 to $14,300 for an astounding 1,330% one year return. However, Bitcoin was far from the best crypto-currency performer of 2017. Ethereum rose by 7,470%, Litecoin increased by 5,775% and Ripple soared by an unbelievable 33,186%.
Now, I like the idea of crypto-currencies. The world very much needs a form of money that is beyond the self-serving manipulations of corrupt central banks. But Bitcoin, along with nearly every other crypto-currency currently in existence, has some pretty glaring flaws.
In short, it might be tempting for alternative asset investors to shift the entirety of their alternative asset allocation into crypto-currencies, especially in light of their recent outperformance. But they should resist that urge. Investment returns come in cycles. Assets that perform well for an extended period of time inevitably underperform at some point in the future – usually when you can least afford it.
Buy yourself a wonderful piece of fine art
Life always seems to move faster than we would like it to. There are always appointments to make, chores to finish and bills to pay. But it is vitally important to step back and appreciate the world every once in a while.
A perfect way to do this is to buy a piece of beautiful art. It could be a colorful print to display over your couch, or an avant-garde sculpture for your coffee table. It could even be a fine piece of antique jewelry for you (or your spouse). Almost anything that has been crafted by human hands with the primary intention of being aesthetically pleasing can qualify as art.
The only rule is that it should be a piece of art that appeals to you. This might seem self-evident, but a surprising number of alternative asset investors get caught up in the idea of appreciation potential above all else.
Don’t fall into this trap. Instead, buy a stunning piece of art just because it speaks to you. If you are lucky, that artwork will not only give you countless hours of viewing enjoyment, but also a reasonable investment return as well.
Make sure you have enough cash or other short-term investments on hand
With the stellar run that both the stock and bond markets have experienced over the last several years, it is easy to believe that the good times will last forever. And it is true that securities markets may continue to rise at a rapid clip for a while to come. But the fortunes of the stock market can change with shocking abruptness.
Therefore, it is wise to reassess your financial position and make sure that you have sufficient cash on hand to weather an unexpected market disruption. It is even more imperative for alternative asset investors – those who collect notoriously illiquid assets like fine art and antiques – to have a healthy cash buffer.
Having a large pile of cash or other short-term investments will help you fight the urge to sell less liquid investments at inopportune times. This might not seem terribly important right now, when every asset known to man is rising without pause. But having sufficient cash holdings will become vital if there is ever a market downturn. It is good to be able to sleep soundly at night without having to worry about financial Armageddon.
