Building wealth is not just about accumulating more money. It is also about building a well-rounded portfolio of assets, from real estate to cars to stocks and other possessions. Diversifying your assets gives you more flexibility when you do need to spend money, and it also insulates you from risk if one asset class experiences a dip in value.
Today, we are going to dive deeper into the world of assets, exploring what assets mean when you are building wealth, common (and less common) asset classes, and how to make your assets work for you. We will also discuss why it is important to diversify your assets as well as how luxury watches and jewelry comprise one of the most crucial asset classes for the modern investor who wants to be flexible with his or her financials.
What Are Assets?
When you are calculating your net worth, you will look at the cash that you have on hand, of course. But remember, wealth goes far beyond dollar bills. Assets are basically any resources with monetary value. Let’s take a closer look at some common asset classes.
Cash and Cash Equivalents: The most obvious type of asset is cash or securities that are similar to cash. These assets have virtually no risk (you are not going to lose your money if you are holding onto it in the form of cash). However, you are also not earning money on these assets – or not very much, anyway. Even if you have your cash in the bank, the average savings account interest rate is just 0.6% APR in the United States.
Fixed Income: The most common types of fixed income products are government bonds and corporate bonds. Essentially, you lend an institution money by buying a bond, and you are paid interest on that bond for the lifetime of the purchase. When the bond matures, the full amount is paid back to you. Government bonds are typically less risky than corporate bonds.
Equities: Generally, equities refers to owning shares in a company. This is normally accomplished through buying stocks, and there are two ways to make money here. Some stocks pay a cash dividend. Other times, you will sell stocks for more than you paid for them, turning a profit. Equities are not liquid, and while they are easy to liquidate, cashing out your stocks at an inopportune time can result in fewer gains or even losing money.
Commodities: While not as common as the other three types of asset classes listed above, commodities are still a mainstream investment option. Basically, commodities are raw materials: Think of metals, agricultural goods, and energy resources. Buying commodities is often thought of as a great way to hedge against inflation, as their prices are influenced primarily by supply and demand economic principles rather than profitability.
Alternative Asset Classes
In addition to the four “common” asset classes we have discussed, there are also some alternative asset classes to consider. The term “alternative” does not mean that these are riskier investments per se, just that they are less common and, in some cases, less accessible to the average person for a variety of reasons. Here are some alternative asset classes to consider as you work toward diversifying your portfolio.
Real Estate: Investing in real estate and purchasing properties can be a strong place to invest your hard-earned money. Still, the housing market can be volatile, especially when you are dealing with high-value properties. Expensive properties can be difficult to offload or liquidate, meaning it may be harder to get fast cash if your investment portfolio is dominated by real estate. That said, you can often borrow against real estate investments provided you have paid down a substantial portion of the principal already.
Direct Investment: Venture capital, hedge funds, or even crowdsourced investments are examples of direct investing. This option is much less easy to liquidate, which is why it falls into the alternative category. Additionally, the average person may not have the capital available to become an angel investor or contribute more directly to a company’s growth.
Valuable Inventory: Some financial professionals consider valuable possessions like fine art, antiques, or even stamps an asset class. While these items are certainly worth something, it can be difficult to determine their exact market value. This can make it hard to borrow against the value of these items and get your money’s worth if you need quick liquidity. Further, it may be difficult to find a buyer for niche items if you are trying to sell them off.
Luxury Watches and Jewelry: We might be biased, but luxury watches and fine jewelry are one of the strongest alternative asset classes out there. They often carry high price tags, but unlike fine art or antiques, they typically have a fairly predictable market value that can be easily appraised by a lender experienced in this type of asset. This means you can quickly borrow against your luxury watches and jewelry, and you will not even need to sell off these treasures.
Why Is It Important to Diversify Your Assets?
Diversification means owning a variety of assets in different classes. These assets will perform differently over time, leading to less risk and higher returns. The performance of these assets is not correlated with each other, which is a good thing. Some assets will thrive, others will fall, and which one is which can shift over the years. This will help you avoid major losses, as other asset classes will bolster the one that is falling behind at the moment.
Basically, no single investment can make or break your financial portfolio when you are effectively diversified. That is why it is crucial to invest in both common and alternative asset classes in order to give yourself the best shot at long-term success.
Why Luxury Watches and Jewelry Are a Strong Asset Class
While luxury watches and jewelry are not a common asset class, that does not mean that they are subpar. On the contrary, these valuable possessions can appreciate over time, are easy to borrow against, and easy to liquidate. In other words, they have the trifecta of what you might be looking for in an investment. So, why are these items so attractive?
Market Value
While the average person may not pick up a luxury watch and immediately know its value, specialists do. When you invest in a luxury watch from a reputable brand (think big names like Rolex, Richard Mille, Audemars Piguet, or Patek Philippe), you are purchasing a desirable asset with limited supply. Working with a specialized lender for luxury watches will make it easy to get an accurate appraisal. In fact, our team at AMETA Finance Group can give you an initial estimate of the value of your watch just from filling out this short form and sending in some photos online.
Selling Your Watch
Selling your luxury timepiece or offloading your jewelry collection are always options. You will generally be able to find a buyer rather quickly, and your pieces will have a somewhat predictable value on the secondary market. If you choose to consign your pieces, leaving them with a trusted seller to help you find the right buyer, you can typically get an even better price. However, selling comes with an obvious drawback: You are giving up heirlooms that may mean a lot to you and may gain value over time. Luckily, there is a better option…
Borrowing Against Your Watch
Luxury watches and jewelry are easy to borrow against, and this is perhaps the crux of why they make excellent investments. Without selling your prized possessions, you can get liquidity in a matter of days when you work with AMETA Finance Group. We can lend you up to 80% of your watch’s market value, with loans capped at $5 million. Plus, low interest rates on these collateral loans make it affordable to borrow and easier to pay back. We have competitive interest rates as low as 4%.
You can also borrow against your jewelry at AMETA. Our highly trained professionals have been in the watch and jewelry space for years, making us the best choice for getting a great loan offer on your treasured possessions.
Discover Financial Flexibility With AMETA Finance Group
The moment that you take out a loan on your luxury watch or jewelry with our team at AMETA Finance Group, you are turning the page starting a new chapter of financial wellness and success. Our partnership with Manhattan’s elite jewelry and watch retailer Avi & Co. helps us make our appraisal process faster and more accurate than other lenders on the market. Whether you are looking to leverage a diamond ring or borrow against a vintage Rolex, AMETA Finance Group is the place to turn for reliable and reputable collateral loans.
Reach out to our team today to kick off your asset loan journey.
