It appears that investors are increasingly turning away from stocks and shares to spend money on high end luxury items.
This is according to research which suggests things like art and wine are the better buy. According to The Economist, spending on luxury goods is up, compared to previous years. It took wealthy individuals (defined as those with at least $1 million in investible assets) and weighted them against high-end luxury items like wines, jewelry, art and classic cars. It used this information to create what it calls a ‘passion index’. And while that index has been steadily falling (around 2 percent annually for the last three years), over the past 12 months, it’s started to rise. The most recent figure, suggesting that returns are up 5.9 percent. CGTN’s Phil Lavelle reports.
Debbie Fox trades diamonds at her store in Ventura County, north of Los Angeles. She understands why investors like diamonds but also points out that many people want to buy them to make money and while the uber-rich will likely put them in a vault, her clients like to wear them too:
“We sell diamonds to everyone,” she tells CGTN, adding: “They are buying it with the intention of… In five years, in ten years, in 50 years, this will still have value.”
But even though her business makes money from people buying jewelry, she’s very cautious about advising people to purchase diamonds as investments only.
“For something to be a good investment, it has to be liquid and tradable. Like a stock, or bonds. Even gold. Those can be traded equally, diamonds can not,” said Fox.
Fine wine is another area seeing investment, according to Alexander Westgarth, the founder of wine broker, Westgarth Wines. He sells wine worth tens or hundreds of thousands to buyers globally and tells CGTN:
“You can spend your mill, your ‘200 grand’, your ‘100 grand’, your ten mill and your money is gonna be there as long as you don’t damage the wine and look after it properly,” said Fox. “If times get hard, you can sell it on and you’ll have kept wealth there which is how a lot of people justify spending vast fortunes on wine collections.”
There is a potential downside, though. Kaycea Campbell, Economics Professor at Pierce College, near Los Angeles, explains.
“I think what’s happening is because the stock market sees these wild swings, people want a safe place to hold their assets or wealth.
But, it is the case where only certain people want these particular assets. They’re not for the layperson, not like a stock in a company like Google.
It’s a rare watch, for example, that, say, Sean Connery wore when he was filming a James Bond movie.. So if you don’t have a particular buyer that wants this asset, you’re never going to move it and I think that’s the big danger when you look at risk.”