4

I realize I am going out on a limb with this question, but it's been on my mind for a while so here it goes. When engaging in a particular type of investment activity, be it stocks, bonds, mutual funds or other securities, analysis typically focuses on comparing rates of return and historic performance of items within a given category (e.g. which mutual fund outperforms other mutual funds).

Other analyses take it to the next level and compare different forms of securities, such as stocks vs. bonds, etc.

I wonder if anyone has taken this to the next level, and is aware of, or has done research comparing historic average returns from entirely different types of endeavors, which may be broadly thought of as 'investment behaviors', where one acquires assets or invests time/resources now in anticipation of future returns. For example: As a novice investor with many years of working life and other pursuits left until retirement, I am facing decisions on where in general to focus my energies.

Examples of possible types of investment behaviors would be investment in:

  • financial securities (in the broadest sense);
  • antiques (various trinkets, baseball cards, automobiles, guns);
  • fine art (contemporary or classical, in whatever medium);
  • jewelry;
  • real estate (buying and renting out actual properties);
  • starting a small business/startup, in order to sell it later (regardless of type of business);

Obviously this is thinking in very broad strokes and will depend in investment time horizon, and answer is probably 'it depends.' But on what?

Has anyone come across books or methodologies which take a similar broad perspective and compare various rather distinct types of endeavors from the standpoint of likely ROI, say, over a lifetime?

Or is this question so ridiculously broad that it's not even productive to think in such terms, and instead one must narrow down to a given type of activity and focus analysis within the one single area?

closed as too broad by Nathan L, Brythan, Dheer, JoeTaxpayer Jan 24 '17 at 2:22

Please edit the question to limit it to a specific problem with enough detail to identify an adequate answer. Avoid asking multiple distinct questions at once. See the How to Ask page for help clarifying this question. If this question can be reworded to fit the rules in the help center, please edit the question.

  • 2
    I like the novelty of this question but it strikes me that the focus should be more on how to calculate ROI for these investments. Once (and if) you can calculate the ROI then it's easy to compare the number across the board. – Nosrac Jan 23 '17 at 17:41
  • 5
    The thing you need to consider here is not just return on your financial investment, but return on your "sweat equity". That is, if you want to invest in antiques, art, or collectibles, you'd have to devote a lot of energy to learning about the subject before you could reliably pick winners. Whereas if you buy mutual funds, it's 30 seconds to do a bank transfer. – jamesqf Jan 23 '17 at 18:16
  • 1
    @jamesqf Good point. On second thought, the whole question is probably sliding into the territory of "what's the most profitable occupation," (not just "profession," but way broader than that) -- and this gets complex fast since so many factors and unique circumstances are involved. – A.S Jan 23 '17 at 18:44
0

On second thought, the whole question is probably sliding into the territory of "what's the most profitable occupation," (not just "profession," but way broader than that) -- and this gets complex fast since so many factors and unique circumstances are involved.

In the world of non-commodities such as collectibles (antiques, art) this probably gets self-deterministic since the supply-demand model no longer applies and is not a predictor.

So paying $20mln for an artwork previously advertised at $200 could mean it is now worth at least as much...in this way someone could be determining their own value system (i.e. become a market-maker), and the ability to profit from it would be driven by the ability to create enough "buzz" more than anything else.

Similarly, a market can be undone if an item previously sold for $20mln is suddenly dumped for $200...that would surely raise eyebrows. I wonder if this is one of the reasons artworks are most often donated (rather than sold) by aging collectors to museums: to avoid creating a value precedent, instead keeping an asset's value ambiguous in perpetuity.

Plus, if there is no direct comparison, there is no limit to the tax write-off one could take? Kind of like that blank slip you end up with after dropping off stuff to Goodwill...only with a much higher potential figure one could fill in. (This explains so much about all the "modern art" collections bequeathed to museums by wealthy benefactors. Must feel good to be able to assign value on a whim to stuff a 5 year old could probably draw in a sitting... ;)

  • 1
    The thing about artworks is that their value is very much determined by the "Emperor's New Clothes" principle. That is, someone (these days, someone named Saatchi :-)) persuades newly-rich people seeking entree into a certain sort of fashionable society that e.g. a stuffed shark is worth $12 million. See the book: amazon.com/Million-Dollar-Stuffed-Shark-Contemporary-ebook/dp/… – jamesqf Jan 24 '17 at 4:35
  • @jamesqf Thank you for the book recommendation, definitely on topic and I am sure a fascinating read. – A.S Jan 24 '17 at 14:52

Not the answer you're looking for? Browse other questions tagged or ask your own question.