There is an old saying, “You have to see it to believe it.” This is the strongest argument for an investment in hard assets. The appeal for many investors is that hard assets can be seen and touched, making them tangible and somehow safer to invest in.
The four hard asset investments below have demonstrated the ability to preserve investors’ capital. As well they have shown that they can make gains in the face of economic uncertainty and the rising costs of living.
Gold has seen has seen a meteoric rise in value. Prices of this hard asset have appreciated over 500% since the year 2000 alone. Buying gold bars, coins, and jewelry ensures that the value of the assets in your hand will move in partnership with spot gold pricing.
The appeal of investing in silver and platinum is two-fold. On one hand, the precious metals are considered to be a worthy hedge against inflation. On the other hand, widespread industrial use is what separates platinum and silver from gold, and really adds to its value.
An expanding agribusinesses has caused the price of farmland to greatly appreciated in recent years. Historical data shows us that this hard asset – between 1987 and 2004 – averaged annual increases of 4.8%. Farmland prices averaged annual gains of 15% between 2004 and 2008, demonstrating to investors that this hard asset can deliver returns uncorrelated to broad equity markets.
Much like other hard assets, shipping container investments have the potential to generate impressive, uncorrelated returns. This is especially true when stock markets are performing poorly. Directly tied to the global economy, shipping containers are used to transport approximately 95% of the world’s cargo. This consistent demand over the last half century has treated investors to returns as high as 35%, even during the global financial crisis in 2008-2009.
Most collectibles, like classic cars and fine wine, are luxury goods that can also be used for personal enjoyment. These hard assets are a viable alternative investment for one simple reason; they can preserve an investor’s capital because they posses intrinsic value given their limited supply.
The Challenge To Owning Hard Assets
The challenge with owning hard assets is that they often require proper storage. Like investing in fine wine for example, careful maintenance is needed to retain and increase the investment’s value. Gold bars must be securely stored, farmland must be mowed, and classic cars and shipping containers must be maintained. If this is something you cannot do yourself, it may become an additional, unexpected expense.