As a business owner in the collectibles world, it fascinates me what people spend their money on and what brings them joy and happiness.
When it comes to money, everyone has different views, and it usually has a common denominator of risk and/or diversity—what is risky, what is safe, how diverse we should be, what is changing, what is staying the same, etc., etc.
But almost everything we do, every single day, has “risk.”
Risk can be defined simply as our exposure to danger.
But "danger" can be very subjective. And since it is subjective, everyone's risk tolerance is a fluctuating scale.
Every behavior in life revolves around this— some innate, others very thought-out. But at the end of the day, we weigh our options with every decision we make.
Basically, what I have learned is that most people enjoy a healthy balance of risk and safety, and that's where the decision to make a purchase or investment lies— something I have been calling taking "calculated risk."
So over the next few minutes, I hope to show you what I have experienced with the connection between the calculated risk most people take with their money and the ROI on that risk.
I hope to show how we can use that calculated risk, whether it be spending or investing, to better enjoy our lives and get the most out of our hard-earned dollars.
The Stock Market: A Proven Model
If we are fortunate to come into money— often, you’ll hear:
“Invest wisely.”
“Build a diverse portfolio.”
“Buy this stock.”
Or something along those lines.
Turn on CNBC and you’ll be flooded with plenty of “assets” whose prices are fluctuating daily on a plethora of information.
And since some of us do not come from financial backgrounds, don’t care to learn about what makes something valuable or not, or do not understand what an asset is— we usually pay a fee to let someone else manage our money.
And that’s a pretty proven model for most investors and money managers.
And it’s all because of calculated risk.
Money managers study historical trends, money models, algorithms, and understand when to buy and sell "assets" (aka stocks/bonds— which are just businesses that the everyone can invest into) to maximize our profits with data and analytics.
And we trust they know what they’re doing because, unless there is a tragic event— most of us have decent, positive returns on our money over time.
Usually, these successful portfolios have a common theme: diversity.
And they do all this to minimize risk while maximizing profits and appreciation of our money, right?
The more money we make— the more comfortable we get with the risk. Part of the game.
While this is a proven model..... there are other options.
Alternative Assets
Some investors understand diversity in a different way and use their money to invest in “alternative assets.”
Alternative assets could be defined simply as something that is not a traditional asset— they may include investment options like real estate, art, or even collectibles.
As pop culture continues to grow and the use of social media is ever-expanding— these alternative assets are becoming more and more popular.
In our era of “look at me” social media or maybe more nicely put: the information era— entrepreneurs, investors, collectors and every day hustlers use these platforms to showcase their valuables and in some cases, depending on their follower count, could even increase that value based on popularity and increased demand.
After all— value is just determined by meaning behind something, the supply and the demand of something anyways, right?
Not sure?
In 1990— before Facebook, Instagram, X, TikTok and all these other apps— if someone was wealthy from investing in real estate, it wasn’t common for people to know about it.
Real estate was strictly valuable from the supply, the demand and the desire of the land— location, location, location.
If someone had an incredible art collection— only the people they invited to their house, or their close friends and family members may have known about it, unless a large media company published something otherwise.
Now a days, however, it's less sexy to be a land owner because Logan Paul has a 1/1 Pikachu card dangling from his neck that he paid 5 million dollars for, and anyone with money under the age of 35 is trying to find the next Pokemon or sports card that will be valuable because of the popularity of that “asset.”
Art hanging up in your home or in a gallery across the world that you own is less desirable because there is an influencer somewhere flaunting his four pairs of Nike Off-White Jordan I Chicago’s on StockX valued at $50,000 because there are so few deadstock pairs left.
Having a portfolio of rental homes with steady cash flow isn’t the first thing people look to build anymore because you can buy limited “shares” of a ’54 Ferrari and put it in your Rally portfolio with your shares of your ’52 Mantle, and game worn shoes of that MICHAEL JORDAN wore during his debut.
It’s a different world. There are different ways to show your net worth.
There is a new way of creating value and investing your money— and it's through a variety of assets and communicating it all on social while building a community around it.
And surprisingly enough to some— it's already here and happening.
In 2023, the global collectibles market was valued at 445 billion, with that number expected to grow 3.8% annually from 2024-2032.
Incredible.
Stay tuned for a follow-up article showing how the collectibles market continues to out perform the S&P and other indecies.
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