I can think of 8 reasons to invest in fractional share alternative assets, and the list continues to grow. Over the last few years, there have been dramatic changes to the investing landscape and how access to world-class assets is evolving. Everyone has their own unique financial situation to manage, but there’s good reason to consider alternative investment and fractional ownership; it’s definitely here to stay.
What I mean by cool is, whatever you are fascinated by and interested in, you can most likely invest in it one way or another. From sports cards to blue-chip fine art. Farmland and office buildings to game-worn sneakers. It’s all available at your fingertips in fractional share alternative asset investing. Do you enjoy discussing fine wine with your friends at parties? Pretending to notice the full-bodied texture and intensity of that delicate cabernet? Buy a couple shares and become an owner in twelve bottles of Screaming Eagle, one of the most expensive and sought after wines in Napa Valley. How cool is that?
It Makes Perfect Sense
The concept is straightforward; however, many people are still unaware that the option exists to own only a fraction of the world’s finest assets. If you’re not familiar with the concept yet, here’s how it works.
Assets like collector cars, watches, rare books, real estate, and memorabilia are offered to the investing public with a pre-determined number of shares representing that item’s ownership. Those shares are then sold at an agreed-upon price. The total number of shares, multiplied by the price investors paid for each share, equals the item’s total value. A $100,000 Ferrari could have 4,000 shares sold to investors for $25 each. 4,000 shares times $25 each equals $100,000, the value of the car.
After the offering is 100% funded, the new owner of the $100,000 Ferrari could be a group of a few hundred investors who legally own the shares. The shares you own can now change value based on supply and demand, just like the stock market.
It’s More Liquid Than Ever
Back in the old days, it wasn’t easy to sell collectibles and memorabilia. I’ve read history books about hilarious stories where events were held at large convention centers where buyers and sellers would congregate and lay their items on a table, with a handwritten price stuck to the side. The eager owners would sit on a folding chair, hoping for a customer to walk past their table and make an offer. From what I’ve been told, before the internet, selling your old Rolex watch was quite an adventure.
Then eBay came along and changed everything. Suddenly anything you owned could be sold with a few clicks of the mouse. Buyers and sellers were matched up instantly across the world. This was a big change for the liquidity of alternative assets and collectibles.
More than twenty years later, eBay is still around, doing what eBay does. But the ability to buy and sell alternative assets has gone to a whole new level. The fractional ownership and investing platforms provide not only access into the world of blue-chip collectibles and memorabilia, but they also offer a way out of those same investments. Selling and turning investments back into cash to be redeployed somewhere else has never been easier and will improve even more rapidly in the coming years.
The Potential for Appreciation
So why would I want shares in a Ferrari, or anything else, for that matter, if I can’t sit in it, drive it, hold it, and look at it myself? The primary reason is the value of those shares has the potential to appreciate. The price has the potential to rise according to the quality of the underlying asset and other people’s interest in that item over time. No different than the stock market. Do you drive your stock market shares? Do you hold your public equity stock certificates and look at them when you get home from work? Do you hang your Tesla stocks on the wall above the fireplace? No, you don’t. You invest in them to participate in the price appreciation over time.
It’s Now Safe
I know one of the arguments against fractional share alternative asset investing is some folks want to own an asset and have it near them to see, touch and feel, not on their phone in an app. People think they would feel better about having a rare first edition Hemmingway book at home rather than owning shares you only can see through a computer or phone screen. I get it. But think about this concept just a little bit deeper, and you may reconsider your “I just want to own it in my own house” argument.
That same first edition Ernest Hemmingway ‘The Old Man and The Sea’ rare book valued at, let’s say, $20,000 is now sitting in your house. Congratulations on a fine purchase. You better have proper storage for that book. Some sort of fireproof safe would be recommended. Quality safes are not cheap. Now you need to insure it. If it’s in your basement, does that insurance cover water damage? If you stash it in your attic, do you have a leaky roof? Not properly stored, it might end up becoming a 70-year-old coloring book for a curious toddler.
Are you going to actually read that book? Just picking it up could potentially damage the dust jacket cover. One of the most important factors in determining most rare books’ valuations is the condition and quality of its dust jacket. Actually paging through a valuable rare book would be even riskier; just the slightest crease or tear in the binding or pages could knock thousands off the value.
Investing in alternative assets through fractional share platforms can offer a high level of safety, depending on the company you choose. Some have climate-controlled, secure storage with insurance policies that limit exposure to loss or damage of the asset. Not only is protecting the asset important, but protecting investors’ ownership shares in each asset is just as vital. One of the most popular platforms for alternative asset fractional share investing, Rally, structures share ownership inside a Delaware limited liability company. They have been on the cutting edge of compliance with the SEC and the changing laws over the last several years.
It’s an Emerging Tech Market
Things are just getting started in alternative asset investing. The technology changes the way we invest in everything from fractional share public equities to commercial real estate and cryptocurrencies. The last few years have seen tremendous changes in the way assets are sliced, diced, and presented to investors. The availability of alternative assets has exploded, and that’s nothing compared to what we will see in the coming years.
Alexis Ohanian, Co-founder of Reddit, had this recent tweet about the early stages of alternative asset investing and the surging popularity.
Ohanian doesn’t just tweet about alternative assets; he’s placed a wager on technology changing the investment landscape with his recent investment in Rally. In a recent Techcrunch interview, he explained, “I’ve been investing in collectibles on Rally for nearly two years. It’s the first platform that has made investing in my passions as easy as buying/selling stock,” he continued, “I’m excited to now also be an investor in the company, and am looking forward to watching Rally continue to grow.”
For Many, It’s the Only Option
The idea behind fractional share investing in public equities was to offer the same opportunities that deep-pocketed investors enjoy, such as buying a share of a great company like Amazon, (AMZN) to smaller investors who might not have the $3,000 it cost for one single share. The same concept applies to alternative asset fractional shares. Want to invest in a Michael Jordan rookie card but don’t have fifty grand laying around? Now you can.
Not only that, but what if you wanted to invest in the highest quality, best conditioned, PSA 10, top-of-the-line Michael Jordan rookie card in existence? There might be only a few hundred in the world. Without fractional share ownership, you would be stuck bidding on PSA 3 second-year Jordan cards, depending on your funds available. It’s hard to say definitively, but these less-desirable cards might not appreciate in value like the very best Jordan rookie.
That’s one of the primary concepts I really like about fractional shares; you have the ability to own the very best quality asset if you so choose. It’s an inclusive type of environment, as opposed to investments that exclude by pricing out a large percentage of the population.
I’m not saying there’s zero downside. New markets such as alternative asset fractional share investing will present plenty of challenges: fraud, improper or over-inflated asset valuations, scams by illegitimate companies. The list is long for potential risk in such a new market. But if you do your research and find the best platforms for investment, you’ll have a chance to avoid many headaches.
It’s Full of Fascinating Characters
We’re not talking about monotone wall street analysts from Morgan Stanley with their matching fleece vests. No offense. I actually do own a vest, and it’s quite comfortable, especially in the fall. The monotonous and boring slog of wall street and the equity markets can turn off many newcomers looking to learn and invest. If you’re an established investor, chances are you already own plenty of publicly traded wall street stocks through your 401k at work or other brokerage accounts. There’s no doubt it’s an important piece of your financial future, but the truth is it can be insanely dull. I think it’s almost by design. How many times can you listen to a CFA talk about CAPE ratios before you start to doze off?
Alternative asset investing and fractional share ownership include one of the most diverse and wide-ranging crowds you will find. From stamp collectors and civil war musket experts to digital art shares and non-fungible tokens, there’s something for everyone in this new and growing market. Cars, watches, books, art, farmland, baseball bats? Chances are you have a slight interest in one of these things. Even with a tiny piece of your overall financial portfolio, a small initial investment in something that actually interests you can introduce you to a community of intelligent, sophisticated, and fascinating characters.
Fractional Share Investing Education
Like I always say, none of this is actual investment advice. We all have our own decisions to make as it relates to investing. We all have different financial circumstances that tend to change at different rates over time. Take full control and responsibility for your investing education and decisions, be sure to find trusted and smart advisors to guide you along the way. Or, if you’re very fortunate, you can simply ask your fast-talking, know-it-all, vest-wearing, brother-in-law with an MBA who will tell you he has all the answers.