The appeal of alternative asset classes has grown considerably over the last few years for a number of reasons. ETFs have opened up the doors to previously difficult-to-reach corners of the market, allowing for self-directed investors of all sizes to tap into everything from commodities to merger arbitrage strategies through the purchase of a single ticker. The increasing correlation among stocks and bonds from around the globe has further prompted many to seek out alternative assets capable of generating uncorrelated returns to broad markets .

Another breed of alternative assets also exists, but unlike ETFs, these investment opportunities are embraced for their tangibility and exclusivity.

Forget Stocks, Buy Stamps: Historical Hard Asset Returns

Hard assets like antique cars, classic paintings, and rare stamps have long been regarded as alternative “safe havens” for those looking to steer clear of traditional financial instruments; what’s appealing is that a number of these alternative assets have delivered eye-popping gains over the past years, many of them grossly outperforming the S&P 500 Index .

Below we examine the trailing returns for a number of alternative assets compared to trailing returns of State Street’s SPDR S&P 500 ETF over the last one, five, and 10 years; please note these returns are as of Q2 2013 from Knight Frank’s Wealth Report.

At first glance, these returns are very exciting, and even compelling enough to make you dig up grandma’s stamp collection. It’s no wonder that many would consider investing in classic cars or classy bottles of wine when you see appreciation well upwards of 100% over the last decade. However, upon closer consideration, it becomes apparent that getting your hands on a ’69 Shelby Mustang or an Andy Warhol original might be a bit tougher than logging into your brokerage account and placing a buy order for 100 shares of the S&P 500 ETF .

Let’s say you are fortunate enough to get your hands on a luxury asset like a prized painting. Where and how will you store it? How will you find a buyer when it comes time to sell? Can you sell it tomorrow? With SPY, your costs are very clear-cut; you have defined brokerage trading fees and an annual management expense of 0.09%. You also have the piece of mind knowing that you can liquidate your entire position (whether its thousands of shares or even millions) whenever you want during trading hours without a hitch.

While these sorts of questions are by no means meant to deter someone from investing in hard assets, they do illustrate the point of “tradeability” quite nicely. That is to say, SPY’s returns are nothing to write home about, but its liquidity, transparency, and “ease of use” go a long way when it comes to democratizing the financial landscape for the average investor .

The Bottom Line

The most recent financial crises rightfully took a big bite out of many investors’ confidence in the stock market, paving the way higher for a number of alternatives that have historically held appeal as valuable hard assets. The scarcity value for a lot of these items will likely continue to increase over the years, inherently bolstering their prices even higher. For the average investor, however, the barriers to entry here are quite steep, if not altogether impossible to hurdle over. As such, while buying ETFs may be far less exciting than shopping around for antique shotguns, these financial instruments offer unparalleled liquidity, transparency, and cost-efficiency, making them viable instruments for investors of all sizes to utilize.

Follow me on Twitter @SBojinov

Disclosure: No positions at time of writing.

Related Articles
  1. Economics

    The Biggest Oil Producers in Latin America

    Find out which countries produce the most oil in Latin America, and learn about some of the biggest oil companies operating in each country.
  2. Professionals

    Are ETFs a Good Fit for 401(k) Plans?

    The popularity of ETFs among investors and advisors continues to grow. But are they a good fit for 401(k) plans?
  3. Mutual Funds & ETFs

    The Top Vanguard Emerging Market ETF

    Learn why growth investors should consider investing in VWO's portfolio of emerging market stocks.
  4. Investing Basics

    How to Pick the Best Muni Bonds and Muni Bond ETFs

    Municipal bonds are a good addition to a diversified portfolio as long as you choose correctly based on population and local economic trends.
  5. Mutual Funds & ETFs

    Top 3 Emerging Markets Bond Mutual Funds

    Discover detailed analysis of the top three mutual funds offering exposure to the emerging markets bonds, and learn about the suitability of these funds.
  6. Investing

    The ABCs of Bond ETF Distributions

    How do bond exchange traded fund (ETF) distributions work? It’s a question I get a lot. First, let’s explain what we mean by distributions.
  7. Investing Basics

    Top Tips for Diversifying with Exotic Currencies

    Is there an opportunity in exotic currencies right now, or are you safer sticking to the major ones?
  8. Mutual Funds & ETFs

    The 3 Biggest Mutual Fund Companies in the US

    Compare and contrast the rise of America's big three institutional asset managers: BlackRock Funds, The Vanguard Group and State Street Global Advisors.
  9. Professionals

    5 Top-Rated Funds for Your Retirement Portfolio

    Mutual funds are a good choice for emotional investors. Here are five popular funds to consider.
  10. Stock Analysis

    The 6 Biggest Russian Energy Companies

    Learn about the top energy companies in Russia, a country that holds some of the largest reserves of oil, natural gas and coal in the world.
  1. Can mutual funds invest in IPOs?

    Mutual funds can invest in initial public offerings (IPOS). However, most mutual funds have bylaws that prevent them from ... Read Full Answer >>
  2. Does index trading increase market vulnerability?

    The rise of index trading may increase the overall vulnerability of the stock market due to increased correlations between ... Read Full Answer >>
  3. What does a high turnover ratio signify for an investment fund?

    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>
  4. What is the difference between passive and active asset management?

    Asset management utilizes two main investment strategies that can be used to generate returns: active asset management and ... Read Full Answer >>
  5. Is there a situation in which wash trading is legal?

    Wash trading, the intentional practice of manipulating a stock's activity level to deceive other investors, is not a legal ... Read Full Answer >>
  6. Are there leveraged ETFs that follow the retail sector?

    There are many exchange-traded funds (ETFs) that track the retail sector or elements of the retail sector, and some of those ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!