Art, wine and real estate are often not correlated with the stock market. And for a long time, average investors didn’t have easy access to investing in these asset classes.
For my own investment portfolio, I invest in a range of investments (in no particular order):
- Index funds and ETFs
- Individual stocks
- Bonds
- REITs
- Real property (home, investment property)
- Gold
- Crypto
Currently, about 56% of my investment portfolio consists of equities and about 44% of real estate (principal residence and investment property). Taking my principal residence or home out of the equation, almost 70% of my investment portfolio consists of equities and non-principal residence real estate investments.
However, I’m always looking for more diversification and particularly for diversification that is not correlated to the performance of the stock market because I’m highly invested in stocks already.
In short, diversification is key: don’t put all your eggs in one basket.
If this wasn’t already obvious to you, the COVID-19 pandemic stock market crash (short albeit) demonstrated it clearly. Airline and cruise ship stocks tanked but grocery store and tech stocks like Zoom rose significantly. A diversified portfolio balances things out – some things go up while other things go down and it all balances out ideally.
So what else is out there? Apparently quite a bit and technology is making it increasingly easy for the average (and sometimes accredited investor – more on that later) to invest in a greater range of assets like:
- Art
- Wine
- Angel Investing
- Fractional Real Estate (Residential and Commercial)
I outline investing vehicles below for each of these assets.
Art
Love art? I know I spend a good part of my free time attending various art exhibitions in my home city and when I travel. I love contemporary art but unless you’re Bill Gates or Elon Musk, forget owning a famous painting. That is until now.
Masterworks allows investors like you and me to invest in multimillion-dollar paintings that usually appreciate well in value over time. I’m talking here about art from famous painters such as Banksy, Warhol, and Basquiat.
While I haven’t invested any money yet on Masterworks, there is something very appealing to me about being able to say I own an artwork (well a fraction of it anyways). I’ll probably invest money in the next year on this platform.
The process isn’t onerous to get set up on Masterworks. They do make you schedule an interview and attend it with a Masterworks representative. My virtual meeting was scheduled for a 1/2 hour and they provide plenty of dates and times so it’s convenient. They asked me a few questions to gauge my interest and net worth and investing experience.
I was informed that the minimum investment on their platform is $15,000 CAD (I’ve seen other bloggers report $10K but perhaps that was in USD?). That investment can be in one piece of art or spread $5K across three different pieces of art. You can also get accredited on their platform and as an accredited investor you can gain access to unique investments but that is optional. (To be accredited, there are various tests, and one Masterworks uses is whether your net worth is $1M or higher and yes, they make you prove it).
Investing in blue-chip art is a unique opportunity because it provides for diversification but art is also not correlated with the other investments you’re already holding. Stocks go down, and while art may go down too, it may not. So chances are when the stock market is experiencing a down turn, your art will continue to appreciate.
Wine
Cult Wine Investments recently launched and as reported in the Globe and Mail, “provides retail investors direct access to fine-wine investing, an alternative investment class that has typically catered to high-net-worth investors”.
Canadian investors with a minimum of $12,500 (or $10K for U.S. investors) can gain access to customized wine portfolios depending on their chosen time horizon and risk level and the wine portfolios are rebalanced automatically. Managements fees range from 2.25 to 2.95 percent, depending on the size of the portfolio.
Like art, fine wine is fairly uncorrelated with the stock market. According to Cult Wine Investments, “The last 30 years are proof that fine wine is one of the best performing assets, with a compound annual growth rate of 10%”.
I enjoy wine, love tracking my wine selections on the Vivino app, and I visit wineries a couple times a year at home or while traveling, and can definitely see myself putting in some money into wine on this platform as an alternative investment.
Angel Investing
OurCrowd is an investment platform that has been around for quite some time and was built for accredited investors and institutions to invest in startups, early stage companies and venture funds. An accredited investor is one who invests in securities that are generally not registered with a securities or exchange commission and the investor meets certain income and net worth guidelines.
For most of us, angel investing has not been accessible. Wanted to invest in Facebook or Uber before it was public? Nope! You probably had to wait until they IPO’ed (Initial Public Offering) and then you could buy stocks through your brokerage. But if you held strong convictions on these companies years earlier and were willing to put up cash as an angel investor in a very risky business, you were locked out of investing and any significant gains pre-IPO companies like Facebook experienced while private and when public post-IPO. OurCrowd helps the more average investor gain access to a world previously reserved for angel investors.
Once accredited on the platform, OurCrowd investors can invest in startups on a deal-by-deal basis or through Venture funds that offer investors a diversified investment vehicle with a single investment: investors can diversify their investment portfolio with multiple funds by sector, stage, geography, or investment thesis.
Residents of most countries can invest with OurCrowd, including U.S. and Canadian investors. However, for Canadians, all investments are made in U.S. dollars.
Admittedly, for me, investing in the venture fund is more appealing given the risky nature of investing in startups given the high failure rate of most startups. A fund allows investors to spread risk over several investments, hedging against putting all your eggs in one basket.
With that said, given that they only transact in U.S dollars and startup investing is very risky, making an investment through OurCrowd isn’t on my immediate radar in 2021 or 2022. While I’m signed up, I’ll continue to follow the space but hold on any investment for now.
Fractional Real Estate (Residential and Commercial)
Earlier this year, I blogged about “Crowdfunding your Real Estate Dreams?“. With Addy, it’s been possible for Canadians to invest as much as $1 for a stake in real estate in British Columbia, Alberta, and Ontario. (My referral code at Addy is: k7qcl2k – For everyone who signs up with my code, Addy will put $25 in my Addy wallet and $25 in yours).
This platform enables investors who don’t want the hassle of being a landlord and/or who can’t afford pricey residential real estate, to gain access to real estate investing for as little as a $25 annual membership (something Addy recently added to their platform in terms of an upfront membership fee – note there are properties you can access without paying the membership fee but you’ll have access to fewer properties to invest in).
I have invested a very small sum of money on the platform to date. I own my principal residence outright (no mortgage) and I own a traditional investment property that I currently rent out that is cash flow positive on a monthly basis. However, I plan to invest more money in 2021 and going forward on this platform.
For me, I’m particularly attracted to investments on the Addy platform that are harder for me to access such as commercial properties or mixed residential/commercial property. I recently invested in a commercial/residential unit on Granville Street in downtown Vancouver through Addy (see image below). As I noted in my original blog post linked above, “There is something enticing about being able to say I own a stake in various real estate projects in various cities, something that is hard to do with REITs”.
Recently, I also came across a crowd-funding commercial real estate platform called Cadre. According to Cadre, “Build your own commercial real estate portfolio at the intersection of private equity and technology”. Cadre allows investors to “Invest in a highly-diversified portfolio of multifamily, industrial, office, and hotel properties across high-potential markets across the United States”.
The downside for Canadians anyways, is that Cadre invests in the United States in U.S. dollars (that pesky exchange rate!). You also need to be an accredited investor and the minimum to invest is high at $25K U.S.D.
For now, I’ll be sticking with Addy but no doubt like most things, these things usually come north across the border or existing offerings in Canada expand to compete against larger U.S. companies looking to do business cross border in Canada.
So what is it going to be for you? A bottle of red? A piece of art to admire? Taking your chance on an early stage tech startup? Owning a piece of a multi-residential development or commercial property?