Tangible investment
Encyclopedia
A tangible investment is something physical that you can touch. It is an investment in a tangible, hard or real asset or personal property. This contrasts with financial investments such as stock
s, bonds
, and other financial instruments.
Some assets are held purely for their ability to appreciate
, such as collectibles, while others are held for the income they generate while they depreciate
, such as equipment held for lease. Others exhibit a combination of properties, appreciating in market value while depreciating in book value, such as rental real estate. Timberland exhibits depletion of timber combined with appreciation of land. Other assets’ values fluctuate with supply and demand, such as commodities, which are liquid
investments unlike most other tangible investments.
These various properties, together with the lack of correlation to traditional asset class values, make tangible investments a means of reducing overall investment risk through diversification
.
Stock
The capital stock of a business entity represents the original capital paid into or invested in the business by its founders. It serves as a security for the creditors of a business since it cannot be withdrawn to the detriment of the creditors...
s, bonds
Bond (finance)
In finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest to use and/or to repay the principal at a later date, termed maturity...
, and other financial instruments.
Some assets are held purely for their ability to appreciate
Appreciation
In accounting, appreciation of an asset is an increase in its value. In this sense it is the reverse of depreciation, which measures the fall in value of assets over their normal life-time...
, such as collectibles, while others are held for the income they generate while they depreciate
Depreciation
Depreciation refers to two very different but related concepts:# the decrease in value of assets , and# the allocation of the cost of assets to periods in which the assets are used ....
, such as equipment held for lease. Others exhibit a combination of properties, appreciating in market value while depreciating in book value, such as rental real estate. Timberland exhibits depletion of timber combined with appreciation of land. Other assets’ values fluctuate with supply and demand, such as commodities, which are liquid
Market liquidity
In business, economics or investment, market liquidity is an asset's ability to be sold without causing a significant movement in the price and with minimum loss of value...
investments unlike most other tangible investments.
These various properties, together with the lack of correlation to traditional asset class values, make tangible investments a means of reducing overall investment risk through diversification
Diversification (finance)
In finance, diversification means reducing risk by investing in a variety of assets. If the asset values do not move up and down in perfect synchrony, a diversified portfolio will have less risk than the weighted average risk of its constituent assets, and often less risk than the least risky of...
.
Types
All of the following are tangible investments:- Real estateReal estateIn general use, esp. North American, 'real estate' is taken to mean "Property consisting of land and the buildings on it, along with its natural resources such as crops, minerals, or water; immovable property of this nature; an interest vested in this; an item of real property; buildings or...
and land - Commodities such as industrial metals, agricultural commodities, livestock and forestry
- Depleting income-yielding assets, such as direct ownership of oil and gas properties, mining rights
- Equipment for leasing, such as railcars, vending machines, etc.
- Precious metals and gemstones (see gold as an investmentGold as an investmentOf all the precious metals, gold is the most popular as an investment. Investors generally buy gold as a hedge or harbor against economic, political, or social fiat currency crises...
) - CollectiblesCollectingThe hobby of collecting includes seeking, locating, acquiring, organizing, cataloging, displaying, storing, and maintaining whatever items are of interest to the individual collector. Some collectors are generalists, accumulating merchandise, or stamps from all countries of the world...
of all kinds, including:- Antiques and ancient artifacts
- Fine art
- Postage stamps (see philatelic investmentPhilatelic investmentPhilatelic investment is investment in collectible postage stamps for the purpose of realizing a profit. Philatelic investment was popular during the 1970s but then fell out of favour following a speculative bubble and prices of rare stamps took many years to recover. Investing in rare stamps...
) - Coins (see coin collectingCoin collectingCoin collecting is the collecting or trading of coins or other forms of minted legal tender.Coins of interest to collectors often include those that circulated for only a brief time, coins with mint errors and especially beautiful or historically significant pieces. Coin collecting can be...
) and banknotes - Autographs and historic documents
- Memorabilia, such as political, celebrity, and sports memorabiliaSports memorabiliaThe term sports memorabilia usually refers to anything that can be directly connected to a sports event or personality. These items are generally gathered by the fans of the particular sport, athlete or team that the item signifies or by collectors who find value in the rarity time-value of these...
- Firearms and militaria
- Trading cards
- Jewelry and timepieces
- Fine wines and spirits
- Classic cars
- Rare books
- Comic books
- Musical instruments
- Toys