Tangible investments are physical things that retain value over time, such as gold, real estate or stamps. Most people invest in intangible assets such as stocks and bonds, which represent debt or ownership but do not correspond to any physical thing. Tangible investments are often conservative, generating modest returns of a few percentage points a year, except when an investment bubble forms.
Many people choose to invest to grow their long-term savings. Investing means purchasing something that you believe will increase in value or produce income such as interest or dividends. Tangible investing means buying actual things that increase in value over time, such as rare collectibles or property in a growing urban center. Anything that holds value over time can be a tangible investment, such as gems and precious metals, oil, antiques, wine and whiskey, paintings and rare books.
Why Tangible Investments
Tangible investments often feel more secure simply because the investor can see and touch them. With some tangible investments, intrinsic value is easier to assess than intangible investments -- this is especially true for real estate. Some investments, especially precious metals and gems, hold out well against inflation as well. However, the perceived security also means that investors temporarily flock to tangible investments in insecure times, driving up prices and creating unsustainable appreciation for a short period.
Tangible assets do not appreciate at high rates, except in investment bubbles. When a bubble forms, investors speculate about unusually high future profits and appreciation, driving prices temporarily high. During bubbles, tangible investments appreciate astronomically, much more than practically any other investment outside of the bubble. For example, during the housing bubble of the 2000s, houses appreciated over 10 percent and in some places 20 percent each year until the growth became unsustainable and it became clear that it was often fueled by faulty loans. Those who bought during the bubble, hoping that high rates of appreciation would continue, ended up losing money. In the following recession investors rushed to buy gold, creating a bubble and historically unprecedented prices.
Real estate and gold, as well as other precious metals and gems, are investments that offer inflation-protected returns. Gold has the advantage of being recession-proof, as many investors buy gold during hard times. Real estate appreciates much more than gold, though building issues and low markets can erode returns. Wines, art and stamps have the potential to appreciate astronomically outside of bubbles — the GB Rarities index has an average annual return of 10 percent — but finding good investments in these areas takes expertise.
Calla Hummel is a doctoral student studying contraband in international political economy. She supplements her student stipend by writing about personal finance and working as a consultant, as well as hoping that her investments will pan out.