Equity to passion assets – The Hindu

Investing in passion assets can be exciting, but it needs a large investment. Also, maintaining passion assets such as art and wine requires special care involving a huge cost. Here, we discuss how you should, if you want to, move investments to passion assets.

Reverse portability

Previously, we discussed portfolio portability. Specifically, we mentioned if you are a working executive with a skill set that can fetch a job across the world, investing in financial assets is optimal compared with physical assets such as gold and realty. To this, you can add passion assets, which are collectibles with investment value. Examples include art, antiques, wine and vintage cars. That said, investing in passion assets can be meaningful if you can efficiently shift possession each time you relocate, or if you are settled in current place of residence. When you move money from financial to physical assets, you are moving from more portable to less portable investments viz. reverse portability.

Shifting investments

You can enjoy the beauty of passion assets while you own them and earn returns when you sell them. But to be meaningful, how should you shift equity investments to passion assets? One, you must not move money from core portfolio earmarked for goals that have a time horizon of 10 years or less. On a conservative note, it is preferable to move money from your retirement portfolio and not from portfolios earmarked for intermediate goals. Two, consider moving realised gains and not the capital. At the extreme, you should not move more than 20% of your equity investments to passion assets. Finally, it is best to move the money from satellite rather than from the core portfolio.

Conclusion

Passion assets are illiquid and need long holding period to earn sizeable returns. It is best to “invest” in collectibles that are rare and unique. Importantly, price leverage works just as well in passion assets as it does for real estate.

That is, an investment of ₹50,000 can double to ₹1 lakh but an investment of ₹10 lakh cannot just as easily double to ₹20 lakh. Finally, remember passion assets are valuable when you have a themed collection; another collector may be willing to pay a good price to instantly possess a unique collection. For instance, a collection of paintings by a well-known artiste or a set of old Tanjore paintings.

(The author offers training programmes for individuals to manage their personal investments)