In the weak economy, many are redirecting their investments to gold, wine… (ARND WIEGMANN/REUTERS )
How is your portfolio doing since the 2008 financial crisis? If you’re like most Americans, it’s probably healed some. After all, stocks are up about 13 percent since October 2008. Bonds are up about 30 percent.
“Winnie-the-Pooh” is doing a bit better. A 1926 first-edition copy of the fabled children’s classic can fetch nearly four times what it did in 2008 — a return of almost 300 percent.
“I’m holding the very first introduction of this character to every generation,” said Patrizio Di Nicola, who snapped up a pristine copy of the book for $1,825 in October 2008. Today, similar copies retail for $7,000. “I don’t ever have to worry if they’re ever going to be worth anything.”
Beset by low yields, choppy markets and a flood of uncertainty from Europe’s debt crisis, investors are increasingly looking to nontraditional assets to bolster their portfolios. The goal is to detach themselves from the ups and downs of stocks and bonds while building wealth in tangible items they enjoy.
Some buy rare books, photos or paintings. Others allocate a portion of their savings to fine wines. Precious metals, in the form of gold coins as well as jewelry, are also popular.
“Collecting assets like art and jewelry is not only an emotional investment or a passion investment,” said
Gerald Escobar, head of business development for Trov, a Silicon Valley firm that helps people track and value their tangible assets. “They are also being bought now for their investment worth.”
Better information is fueling the market. There is now an “enormous amount of data available” on how much, say, a painting by German artist Gerhard Richter could be worth, Escobar said. Auction houses provide one point of reference. There are also indexes that track the value of fine art, wines and other assets.
Escobar has helped catalogue household collections of paintings, sculptures, comic books, classic cars, butterflies and even Egyptian artifacts. Trov is building a software program to aggregate such data and help people track the value of their household assets over time – just like a stock.
But for many, it’s the fact that their collectible is not a stock that makes it more attractive.
Di Nicola, a computer technician in New York, turned his love of collecting children’s books, posters, used postcards and original photos into a full-fledged investment strategy in part because he didn’t trust corporate America.
“When I heard about Enron, that was it,” he said. “And then WorldCom started,” he added, referring to another corporate scandal. By 2002, he had made the decision to never again invest in stocks, which he’d sold out of in 1999 when he bought his house.
In 2007, he found a different investment strategy: children’s books. The 42-year-old father of two got the spark after watching the animated movie of “Charlotte’s Web” with his eldest daughter in spring 2007.
“I didn’t see anything else that I wanted to put money into,” he said. He does not keep an individual retirement account and is shifting the remaining half of his workplace retirement account into collectibles he thinks society will appreciate more with time.
His favorites include a 1952 first edition of “Charlotte’s Web” he bought for $400 and several 1931 French first editions of “Babar” he bought for $50 to $600 each. He does not keep a precise count of his collection but estimates he has bought about 200 books — mostly through Web sites such as eBay. The total he has spent on his books is less than, say, the $32,500 price tag of a new Audi A4. “And people leave their car in the street,” he quipped.
Children’s books are not immune from the economic malaise gripping the stock market. If another deep recession were to grip global markets, fewer people might be willing to pay top dollar for Di Nicola’s “Winnie-the-Pooh.”
But so far, the strategy is working. At New York’s Bauman Rare Books, on Madison Avenue, a first edition of “Winnie-the-Pooh” sits on display with a $7,000 price sticker. A 1931 “Babar” goes for $3,500. A 1952 “Charlotte’s Web” can be had for $4,000. That means, were he to sell, Di Nicola could already more than recoup the original investment on many of his books.
But for now, he said, he is not tempted to sell.
“When you own things like that, the last thing you want to do is to be in a rush to sell them,” he said.
The plan is to build the collection to give to his daughters someday, though he may sell some strategically to help with retirement or other life events.
Justin McShea, a bookseller at Bauman, is seeing more buyers like Di Nicola.
“A lot of people look at it as a safe place to park some money,” McShea said. “Plus, you get to have these amazing books in your home.”