10.04.2024
In this article:
Collectibles can be a remarkably lucrative investment avenue, offering potentially high returns and an exciting new path for those looking to diversify their portfolios. However, it’s crucial to understand that these unique assets are more suitable for a long-term strategy that emphasises steady growth and wealth accumulation over time rather than immediate financial gains. This is due to a variety of reasons, and setting realistic expectations from the start is essential, as the path is not without its challenges. These challenges include navigating the nuances of holding periods, overcoming concerns about liquidity, and understanding tax implications for shorter-term holdings.
At Timeless, our strategy addresses these issues, highlighting the importance of consistent investment while providing solutions to improve liquidity and simplify other concerns.
This article is part of our Timeless Guide series, aimed at assisting you on your investment journey. You can learn morehere.
As with any investment, collectibles are subject to holding periods. Holding periods are the amount of time an investment is held by an investor, or the period between the purchase and sale of a security. When it comes to collectibles specifically, their holding period is determined by several factors, each specific to the asset class involved. These investments are typically long-term, with the duration of the period they are held in storage being influenced by a variety of historical performance data. This data ranges from the trajectory of specific indices, expert market analysis, and financial market cycles to comprehensive analyses such as the Knight Frank Report. Sometimes, the market value updates can be less regular than usual, which is due to the scarcity of the asset and the long-term nature of collectible investments rather than market inactivity.
Understanding Market Value:
Given the long-term nature of collectible investments, market transactions are less frequent. This results in market value updates being less regular, a situation that reflects the scarcity of any given collectible and the long-term nature of such investments rather than market inactivity.
To enable you to track market movements, identify trends, and make informed decisions based on current prices and potential trading opportunities – we have found a solution. At Timeless, we leverage technology to offer insights into the holding periods of various collectible assets through our app, providing users with specialised market data and updates.
The holding period for collectibles investments varies across asset classes due to specific characteristics like maturity and market dynamics. For instance, wine and whisky often necessitate longer storage periods. This is due to their age-related value growth: as bottles are consumed or affected by evaporation, their scarcity increases, leading to a simultaneous increase in demand. Generally, less volatile markets such as those for fine spirits, vintage cars, and art offer steadier – albeit slower – returns. Conversely, assets tied to current trends and cultural hypes, such as trading cards and sneakers, can potentially offer quicker returns due to their value generally being tied to said trend cycles.
It’s also worth noting that while a high CAGR for an asset with a short holding period might erroneously suggest that holding an asset longer could yield greater returns, it is more complex than that. This value relates to the past and is, therefore, only a reflection of historical performance not an indication for the future.
The decision to sell early, even for assets with a high CAGR, considers market timing and asset-specific factors, like increased demand or rare opportunities that can maximise returns. Our team’s expertise in analysing market trends allows us to identify these optimal moments for selling, ensuring that decisions are not just driven by historical growth but are also strategically aligned with current market dynamics and future potential.
Generally speaking, longer holding periods are advantageous due to their relative immunity to fluctuations. Due to this, practising patience during temporary downturns instead of hastily selling out of an impulse triggered by uncertainty is usually the recommended course of action. Research from Flossbach von Storch indicates that the risk of losses decreases and the likelihood of gains increases the longer an investment is held – even when it comes to the stock market. Studies from Deka Investments and Boerse confirm this trend. This notion especially holds true for collectibles as an investment, since they experience less correlation with traditional financial markets, and can increase their value even during market downturns.
Therefore, it can be argued that adopting a long-term investment approach is pivotal for accumulating wealth. A steadfast commitment to one’s investment strategy, even in the face of short-term lapses in returns, can secure financial stability well into retirement, helping to mitigate issues like the pension gap.
Investing in collectibles is a strategic way to diversify and secure potential returns.
To maximise the return on your investments, we prioritise a future-oriented perspective. This means that through meticulous market observation, we pinpoint the best time to end the holding period of your collectible assets and sell them accordingly. Pinpointing this moment involves analysing auction results and current offers, spotting trends and market upswings, as well as identifying exceptionally lucrative opportunities through our global network. Precisely because of this ongoing analysis, we are sometimes even able to shorten the expected length of a holding period due to a market surge or a standout offer.
For instance, we were able to sell our Cartier Tank Arrondie within a week at a +20%** profit, capitalising on a surge in Cartier’s popularity and the brand’s resilience within the luxury market, which our team of experts had spotted early on.
Similarly, our team noticed a downward trend in the whisky market and was able to exit our 1964 Bowmore Black 42 Year Old at an opportune time, allowing for a +20.83%** value increase. It achieved a return 29% higher than the Rare Whisky Icon 100 Index, which fell by 8.2% over the same period.
Achieving such returns necessitates profound expertise and a global network of buyers, which our Timeless Investments team has successfully cultivated over time. With entry points starting at just 50€*, we provide everyone the chance to invest in hand-picked collectibles without the need for extensive research. Our expertly curated selection ensures you benefit from our insights and market knowledge, simplifying your investment journey.
Tip: Invest and sell according to your personal preferences: If you identify a good time to sell yourself, you can trade your fractions at any time in the Timeless App and are not tied to the holding period.
Beyond the recommended holding periods, you have the flexibility to sell at your discretion using our app’s trading feature, which supports short-term liquidity and allows for sales based on your own timeline and market evaluation.
Find out more about the Timeless trading function here.
Profits realised on Timeless are considered private sales transactions. Gains of up to €600 within one year can be tax-free for users from Germany. After a holding period of one year, profits above the exemption limit may be tax-free.
Please contact your tax advisor for further information, as Timeless does not provide any tax advice.
The Timeless app provides a detailed transaction history, categorising transactions by year and showing investments, withdrawals, and profit/loss statements, with a breakdown for holdings less than and over 12 months, available for download as a PDF from the wallet section.
Find out more about what the transaction history here.
Begin your investment journey with Timeless today and leverage our insights to navigate the market confidently and reach your financial goals.
VILLERET RÉPÉTITION MINUTES
SAMAROLI BOUQUET 1966
*Incl. VAT, plus service flat rate and management fee.
**Realised increase in value of the specimen fractionalized by Timeless in the period between drop and exit of the asset. This is not an indication of the future.
