Fight Inflation With Collectibles

New platforms and fractional shares let ordinary investors add fine art, wine, and more to their portfolios.

- ADAM SHELL

ALTERNATIVE ASSETS

Now that the inflation genie is out of the bottle, there's growing affection for so-called passion investments. Inflation (as your wallet N and 401(k) statement have no doubt told you) is behaving like a pickpocket and wreaking havoc on your finances. The biggest consumer price spike four decades and volatility caused by rising interest rates is shining a spotlight on collectibles such as fine art, wine, and vintage watches. These alternative assets don't move in lockstep with stocks and bonds (which have sold off sharply this year) and perform well when inflation goes rogue.

Just like the price of chicken or cheese, prices for collectibles tend to rise when the consumer price index spikes. Some Wall Street pros say inflation peaked at more than 8% in the spring, but inflation will likely stay higher than we've been used to for 2022 and beyond. And studies show that tangible items such as Domaine de la Romanée-Conti wines, Andy Warhol paintings, and Hermés Birkin handbags, to name a few examples, provide a hedge against inflation and an added layer of portfolio diversification.

According to a 2021 paper by Duke University finance professor Campbell Harvey and researchers at U.K. investment firm Man Group, during the eight major inflationary periods from April 1941 through July 2008, art delivered an annualized gain of 7%, wine 5%, and stamps 9%. That's better than the 7% annualized decline over the same periods for stocks and 5% drop for government bonds, the research shows.