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When investing, we usually consider the main asset classes to be cash, equities, bonds, and property. However, a recent Investec Wealth & Investment (UK) survey has uncovered growing interest in more unusual assets.
A small, but notable, proportion of investors – and particularly younger people – are seeking lucrative returns on luxury goods and items of beauty. We call this approach “magpie investing”.
How popular is magpie investing?
According to our recent survey, almost one in ten UK adults is a magpie investor. In Scotland alone, 14% of survey respondents told us that they’ve bought a luxury item they hope will deliver an attractive return.
We found that most people are putting a relatively small amount of their wealth into this trend. In Scotland, the majority of magpie investors told us they’ve spent between £10,000 and £24,999 purchasing luxury items. However, across the UK, around one in three magpie investors has spent more than £25,000, with 1% spending between £500,000 and £1 million.
We also asked magpie investors how they see the amount they invest in valuable items changing over the next five years. Scottish respondents expect it to either remain the same or increase slightly.
What are the most common purchases?
Jewellery is the leading category of luxury items bought as an investment. 46% of UK magpie investors and 56% of Scottish magpie investors told us they had bought jewellery for this reason.
Other valuable items that Scots have invested in include watches, wine and whisky, and collectables such as cards, comics, or books.
What are the benefits and risks of this approach?
Magpie investors may see this approach as an opportunity to turn their passions into profits. It can seem more fun or exciting to purchase something beautiful, like a piece of jewellery, or culturally significant, like a collectable, than to invest in something more established, such as UK Government gilts.
In some cases, these choices turn out to be lucrative. Specialists in art, watches, etc. have certainly been known to make substantial returns by trading on their passions. Plus, there is the benefit of owning the luxury items for a period, as well as the benefit of any potential return on the sale.
However, those who are curious about this approach should note that not all luxury items increase in value over time. On the contrary, the ones that do are extremely rare, and a truly expert level of knowledge is usually required to identify them.
Another risk to consider is that luxury items are illiquid in nature, meaning that it can be difficult to release wealth once it is tied up in them, as it can take a long time to find a suitable buyer.
How would magpie investing impact your broader investment strategy?
At Investec Wealth & Investment (UK), we take a holistic approach to managing the wealth of the high-net-worth individuals we work with, structuring each client’s investment portfolio according to their specific personal goals.
In certain cases, it might be appropriate to consider a client’s valuable items and alternative assets as part of their overall investment strategy. If this is something you’d like to discuss, we can arrange a chat.
We have wealth management teams in Edinburgh and Glasgow, as well as 13 other locations across the UK and the Channel Islands, so you can start by contacting your closest regional office.
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Whether you are looking to invest for the first time, or have an investment portfolio already, if you don’t know where to begin, or know exactly what you are looking for, we can help. Contact your local Investec experts in Edinburgh today, to discover how we can help you to fulfil your financial goals, and live life the way you want to.
Important information
The information contained in this article does not constitute a personal recommendation and the investment or investment services referred to may not be suitable for all investors.
Investec Wealth & Investment (UK) is a trading name of Investec Wealth & Investment Limited which is a subsidiary of Rathbones Group Plc. Investec Wealth & Investment Limited is authorised and regulated by the Financial Conduct Authority and is registered in England. Registered No. 2122340. Registered Office: 30 Gresham Street. London. EC2V 7QN.