CFP

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Characteristics, Uses and Taxation of Investments - Tangible Assets


c. Tangible Assets: quite literally, perceptible to the senses. One can see, hear, touch (though carefully, if at all) and taste.

  1. Collectibles - this is a broad category that encompasses all manner of rare items of value. Rare coins [While still a relatively inefficient market, the trading of rare coins has become somewhat more standardized owing to professional appraisal services such as Professional Coin Grading Service (PCGS®) that provide a more standardized valuation process (http://www.pcgs.com)] and art are probably the most widely known example. Other well known examples are antiques, vintage automobiles and wine. The possibility exists to realize substantial gains if the item in question has the potential for substantial appreciation due to its uniqueness. Valuation is difficult, relying on the opinion of a knowledgeable appraiser familiar with the item in question. Secondary markets rarely exist for collectibles as they are not traded frequently resulting in few data points to buttress any appraisal of their worth. Some observers would argue that collectibles should remain just that. Because of their unusual attributes, their status as an investment may be viewed as questionable. Markets for and interest in collectibles can be fickle and are among the least efficient. Few buyers, knowledgeable or otherwise, exist. Sale for some items is accomplished at auction. Gains on the sale of collectibles are taxed at a rate of 28% (as ordinary income).
  2. Natural Resources - direct investment is often too expensive for the individual investor and is reserved for large pension funds or endowments. Individual investors' entry into a natural resources play would be through a pooled investment such as a mutual fund.
  3. Precious Metals - stores of value whose role as a hedge has over time been somewhat lessened due to the expanded capabilities of derivatives used for this purpose. Examples include gold, platinum and palladium.
Securities Markets

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