20 Examples of Physical Assets To Invest In
Today, let’s discuss the best physical assets to buy with your money.
First of all, I will present a list of physical asset examples. Second, we will cover 2 typical questions about physical assets. Then, we will review each physical asset example from the list. Finally, I will share my views on the best way to get started investing in physical assets.
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Examples Of The Best Physical Assets To Buy For Your Investments
- Primary Residence
- Single-Family Homes
- Vacation Homes
- Rental Properties
- Apartment Buildings
- Raw Land
- Commercial Real Estate
- Industrial Real Estate
- Works of Art
3 Best Physical Assets To Buy
I won’t keep you in suspense. Here’s my opionion on the best 3 physical assets to buy from the list above.
- Primary residence
- Rental property
I will explain my thought process at the end. And throw in a 4th best physical asset to buy too. But only when you have all of your investment bases covered.
Now, let’s move on to 2 frequently asked questions about the best physical assets.
First of all, what are physical assets? Furthermore, why put your money in physical asset investments?
What Are Physical Assets?
According to the Farlex financial dictionary, physical assets are actual property.
Let’s broaden that definition a bit. First of all, physical assets have economic and investment value. Furthermore, they have a “material existence”. Finally, such assets have a physical presence that can be seen and touched.
Physical assets are referred to in a variety of ways. For example, they are also called:
- Hard assets
- Tangible assets
- Real assets
- And in general terms, productive assets
Here are some examples of physical assets that you are likely familiar with. They are things that we use and see every day. Houses, vehicles, land, and commercial buildings come to mind immediately.
Disclosure: This post contains referral links.
Why Consider Physical Asset Investments?
Physical assets tend to perform best in a couple of different situations. So, they provide important diversification for your investment portfolio.
First of all, physical assets can outperform in times of economic uncertainty. Gold is a perfect example of this.
Investors tend to put money in gold when they are nervous about the economy. And believe inflation is on the horizon.
This leads me to my second situation where hard assets do well. That is, during inflationary times. Most noteworthy, investors are currently worried about inflation in the future.
Why is that? Because of low interest rates. And large amounts of fiscal stimulus from governments around the world.
Inflation leads to higher interest rates. In turn, higher interest rates can reduce the value of financial assets, like stocks, bonds, and loans. While physical assets, at a minimum, keep up with inflation.
Finally, not every physical asset will appreciate all of the time. Most tangible assets and physical asset investments will have periods when their value decreases.
So, before you invest, always do your research. After all, it’s your money! And you should manage your money wisely.
So, with that background in mind, here is a comprehensive list and discussion of the best hard assets to buy. I broke the list of hard assets to invest in 3 main categories:
- Real estate
- Commodities & precious metals
- Luxury items and collectibles
Before we conclude, I will give you my opinion on the best physical assets to buy from this list.
Best Physical Assets To Buy: Real Estate
Let’s kick this epic list of physical assets off with real estate investing.
Property is a very popular investment option. And, real estate is a physical asset.
Your primary residence is one of the best physical investments.
A primary residence may be a single-family home, condominium, or townhome. If you are like me, you may not make a killing on property appreciation.
But we all have to live somewhere. And to many people, their primary residence is one of the largest hard assets that they will ever own.
Your property’s price appreciation will typically keep up with inflation at a minimum. And in some areas, much greater property price appreciation can be realized by the owner.
Single-family homes are a tangible asset to invest in.
Some people own more than one home. Over and above their primary residence for any number of reasons. Rent it out and your additional single-family home can provide a source of income for your investment portfolio.
During the financial and real estate crisis, investors swooped in and bought foreclosed homes at depressed prices. They expected the market to recover over time and to realize the gains from the higher market prices the recovery would bring.
Many people own a vacation home in a popular vacation spot or resort town. Vacation homes are another example of real assets.
By the ocean, near the lake, or in the foothills of the mountains, a vacation home can be a relaxing place to go for a family gathering.
Vacation homes can also be rented out when not in use for additional income. The more popular the vacation spot becomes, the more likely your vacation home will increase in value. And become one of the best physical investment assets you can buy.
Rental properties are hard assets. They can be one of the best physical investments.
They are purchased by their owners for the sole purpose of renting their use to one or more tenants. Rental properties have the double benefit of income generation along with asset appreciation.
In several different situations, apartment buildings are a good physical asset to invest in.
One such situation is a location with a transient population. College towns come to mind immediately.
Another situation is where the price of homeownership is very high. So, people will have more incentive to rent an apartment, rather than buy their primary residence.
Apartment buildings can be a very productive asset. Since they are an appreciating asset and also produce income for your portfolio of investments.
Land is a tangible asset.
The unique aspect of land is that there is only so much of it. And last I checked, no one can create more land.
So as the world’s population grows, land is finite and becomes a more valuable physical asset that can appreciate.
We all have to eat. That may consist of direct consumption of products off the farm. Or, indirectly through grains fed to livestock.
Farmland is a real asset that can appreciate. And, if you are a farmer, a farm is also an income generating asset.
Are you interested in investing in hard assets, specifically farmland? Here is a great resource for you to check out.
Commercial Real Estate
Commercial real estate is a hard asset. For the right individual, it can be one of the best physical investments.
One of my neighbors owns several commercial real estate buildings around the area in which I live. He likes to brag about it a little bit.
Normally that would bother me. But for some reason, he’s kind of a funny and humble dude.
Commercial real estate can be occupied by many different kinds of tenants. Retail shops, restaurants, doctors, lawyers, and accountants.
Industrial Real Estate
Industrial real estate is occupied by factories, warehouses. and distribution centers. It is another example of a physical investment asset whose value can appreciate.
My Dad spent his working years as the owner of a grain elevator. He bought grain from local farmers, stored it, and sold it to larger grain companies.
He owned the buildings, equipment, and the industrial real estate it was operated on. They were productive assets and the physical assets he invested in for his business. He made an active income from this combination of physical investment assets.
So far, we have been discussing real estate assets. Just remember that owning physical real estate can be a big responsibility.
There are other ways to participate in real estate investing. Real estate investment trusts (REITs) come to mind immediately.
But owning stock in a REIT is not a physical asset. So, that type of real estate investment falls outside the scope of this article.
That concludes our examples of real estate hard assets to invest in. Let’s move on to our next category of best physical investments.
Best Physical Assets To Buy: Commodities & Precious Metals
Next up, physical asset category 2. That being, commodities and precious metals.
Our world runs on many of these hard assets. So, they should not be overlooked as some of the best physical asset investments.
Oil, also known as black gold, is a tangible asset that can increase in value.
Like it or not the global economy still runs on oil. It is a volatile commodity, but over the long run, oil has been an important physical investment asset.
Supply and demand determine the price of oil. Over the past decade, the US has turned into a large producer of oil from the process known as fracking. The increase in supply has kept the price of oil constrained as compared to 5-10 years ago.
Other factors than supply and demand also come into play when determining the price of oil. War, peace, geopolitical tensions, and global economic performance come to mind.
Unless your land has oil reserves, buying and selling physical oil is not an option for most investors.
You can invest in oil indirectly by purchasing shares in oil-based energy companies. Or, funds that invest in the energy sector.
Other means to invest and gain more direct exposure to oil include oil futures, oil options, and exchange-traded funds. These are all assets where their value appreciates in conjunction with the price of oil.
I consider these means to invest in oil as soft assets. Or, a financial asset. Not a pure physical asset investment.
So, if you are looking for physical asset investments, oil is probably not the best place to get started.
Copper is a real asset that appreciates in value mainly during periods of economic growth. That is because copper has many productive economic uses. It is used in heating and cooling systems and buildings.
In the downtown where I live, there have been several old buildings torn down this year. The land is being cleared for new luxury apartment buildings. In total, I have seen 6 buildings demolished in our village.
Before the demolition, I observed the work crews going through the buildings removing items of value. One of the things I noticed being removed was copper. The physical asset, copper, was being salvaged for resale.
Most of us can’t be copper scavengers. So, direct ways to invest in the metal include copper bullion bars and copper coins.
Source: How to invest in copper
Maybe you have some farmland or live in a rural area? Perhaps you aspire to be a hobby farmer. If so, you may have the option to raise livestock.
It may sound like 1 of the more unusual investments you can make, but it’s not. I was on vacation recently and met a man and a woman that raise honey bees. Yes. Honey bees are a form of livestock.
My neighbor has a beehive on his property. Just last week he brought me a jar of his homemade honey.
Raising chickens has also become very popular in recent years. My sister-in-law has a chicken coup. She buys the baby chicks from a third party and raises them for their egg production.
Productive livestock, like bees and chickens, are examples of hard assets to invest in. Furthermore, you may be able to earn income by selling their eggs, honey, milk, etc.
Gold is also known as the “yellow metal”. Investors who are gold enthusiasts are sometimes called “gold bugs”. Gold is a very well-known and popular physical asset to invest in.
As I said at the beginning of this article, gold is a physical asset that typically appreciates during inflationary times. And, during times of severe economic and financial stress. But, outside of jewelry and dentistry, gold does not have many practical applications.
Gold can be purchased directly in various forms like bars and coins. For investors who do not want to hold the metal, exchange-traded funds are good options.
The SPDR gold trust, ticker symbol GLD, is a popular choice. It is an exchange-traded fund and holds the physical asset, gold in this case, on your behalf.
Make sure you buy and sell ETFs for free. I use the Webull app to do so. It’s fast, powerful and easy to use.
I have written a couple of different review articles about the Webull app. They are based on my research and the use of this investment platform.
Are you interested in the Webull app? Then be sure to check out 1 or both of these Webull reviews.
Silver is another popular tangible asset to invest in. It has a few more practical applications than gold.
But as an investment, silver has many similar characteristics to the yellow metal.
Next up, it’s time for our last major category of best physical assets to buy. So, let’s move forward with luxury items and collectibles.
Best Physical Assets To Buy: Luxury Items And Collectibles
The third category of physical assets is luxury items and collectibles. They range from the mundane, like a bottle of wine. To the exotic, gemstones for example.
Gemstone investing is not for everyone. But for those who love fine gemstones and beautiful jewelry, rare gems have a good history of increasing in value over time. They are another form of real assets.
When the stock market is declining and currencies are losing value, gemstones tend to be a reliable store of value. They are also compact, portable, and private.
Here are the top 10 gemstone assets that appreciate. They are potential physical assets to invest in.
- Blue Sapphire
- Tsavorite Garnet
- Spessartite Garnet
- Jadeite Jade
- Imperial Topaz
- Paraiba Tourmaline
Source: The top 10 investment gems
I don’t know about you? Yes, gemstones may be a physical asset to invest in. But I don’t have very many of those little jewels lying around my house!
The average automobile is a depreciating asset. I’m pretty sure my 2009 Toyota Camry is worth less every year that I have owned it.
I don’t even bother to value it and add it to my net worth calculation. The same goes for my wife’s 2007 Toyota Corolla. So, don’t think about your everyday use vehicles as hard assets to invest in.
On the other hand, classic cars and vintage automobiles are a different story. They can be physical asset investments that appreciate in value.
But, only a handful of classic cars will make for a good physical investment. Factors such as the scarcity, brand, age, image, and desirability of a classic car can affect its value.
Some brands, especially Ferraris, tend to appreciate and are reliable investments. And, other brands that were ignored in the past can suddenly spike in value.
Here are a few classic cars with the best investment potential:
- Lamborghini Diablo
- 1957 Ferrari 410 Superamerica SIII
- 1967 Volkswagen Beetle
- Mercedes-Benz 190
- 1984 Pininfarina Azzurra
- 1998 Porsche 911 Turbo S
- 1994 Mazda RX-7
- 1972 BMW 2002
- 1998 Porsche Boxster
- 1973 Datsun 510
- 2002 Porsche 911 Carrera
As with most investments, increased demand equals increased asset appreciation. And, art is no different when considering physical assets to buy.
However, several factors can make for smart purchases and increase the value of art over the long term:
- Buy something you love so you desire to keep it as a long-term investment
- Buy an original that is signed by the artist
- Iconic figures or images generally retain value
- Controversial or political pieces with historical significance also fare well in resale
- The notoriety of the artist is a safer investment choice
- But art from emerging talent can have more upside potential
- Obtain certificates of authenticity and retain your proof of purchase
- Quality framing will make your art look better and protect your investment
Coin collecting can be a very profitable venture when done the right way. And, coins are tangible assets to invest in. They too can increase in investment value.
Coins derive their value from two principal sources. The first is the physical metal contained in the coin, which is also known as its bullion value.
Gold and silver are popular metals used in coins. We have already discussed their value as physical asset investments.
But coins have a second source of value called their numismatic value. This factor applies mostly to antique and rare coins. And, numismatic value is quite a bit harder to determine than bullion value.
Ultimately, a coin’s numismatic or collector value depends on buyer sentiment. But there are some general guidelines.
For example, the fewer units of a coin that were minted, the higher its collector value is likely to be. This is due to a shortage of supply.
So we are back to a concept I have mentioned throughout this article. The concept of supply and demand is important when determining the best physical investments.
There are two kinds of stamps to consider as real assets. But only 1 is useful for investment purposes. The first is collectible stamps. And the second is investment-grade stamps.
Collectible stamps are for people into stamp collecting just for the joy of it. Collectible stamps are not usually for investment purposes.
On the other hand, investment-grade stamps are identified as having the potential to grow in value.
Only a very small fraction of stamps are likely to increase in value. They are very rare. And they have to be in a pristine condition.
Investment-grade stamps are physical assets to buy and are assets that can appreciate. But they should only be for the investor who has all their financial bases well covered.
For example, Bill Gross, founder of the asset management company PIMCO, has reportedly invested between $50 and $100 million of his $2 billion fortune buying stamps.
Stamps have proved to be among his most profitable investments. Mr. Gross sold a small portion of his collection for four times the initial investment at a charity auction.
And, this is what he said at the time. Mr. Gross called the gains “better than the stock market.”
Most wine isn’t suitable for long-term investing, and it’s unlikely that you’ll find a vintage that produces significant returns.
However, investment-grade wine has a reasonable chance of appreciating in value over the long term, typically at least five years. It is another example of a hard asset to invest in.
Investing in hard assets like wine has a host of challenges from sourcing to storing to selling. Get it right and make some money. Get it wrong and just enjoy your bottle of wine.
Wow! Cars, art, coins, stamps, and wine as physical assets to invest in. Who would have thought? I do not personally invest in any of those asset classes.
But when might it make sense for the average investor to invest in one of these physical assets? Perhaps if one is your leisure interest.
For example, maybe you love stamps and collect them as a hobby. Do your homework and consider making a small investment through investment-grade stamps.
Best Physical Assets To Buy: In My Humble Opinion
We have covered many examples of physical asset investments. But what are the best physical assets to buy? Here are my thoughts…
First of all, for an average person like me, I like to stay close to what I know. And “play it pretty safe” as I like to say. Furthermore, know that hard assets are not a passive form of investing.
Also, before jumping into a heavy allocation of physical asset investments, I would start investing with these priorities in mind…
4 investment priorities before investing in physical assets, excluding the investment in your primary residence:
- Interest-bearing savings for your cash emergency fund
- All debt eliminated other than the mortgage on your residence
- Maximizing retirement savings into qualified retirement accounts
- An appropriate allocation to financial assets: stocks and bonds
Make sure those investing tasks are taken care of first.
After that, here’s how I recommend going about figuring out the best physical assets to buy for your investments.
1st Physical Asset To Buy: Primary Residence
First of all, everyone needs a place to live. So, I prioritize my residence as the top physical asset to buy.
There is no need to pay rent if you can afford to own. This assumes you are up for the responsibilities of homeownership.
2nd Physical Asset To Buy: Gold
Next, I would put a small amount of my net worth in gold. No more than 5%.
Gold is a proven alternative investment. And this real asset can be held through an exchange-traded fund for convenience. Where the ETF holds the physical assets on your behalf.
3rd Physical Asset To Buy: More Real Estate
Next, I’m not a landlord. And I do not intend to become one.
But, if I wanted more real estate in my portfolio of physical assets, I would look for a property to own near my home. And then rent it out.
4th Physical Asset To Buy: Collectible Or Luxury Item
Finally, I would look to my interests and hobbies for a collectible or luxury item as a physical asset to invest in. Other than exercising and running this blog, I don’t have a hobby. At least not one that provides physical asset investment potential.
For you? It all depends on where your interests lie.
Are you interested in art? Then look for a good investment as well as a piece of art you will enjoy.
Do you like a good bottle of wine? Then, find a few to collect and “lay down” for several years.
Time To Wrap Up This Discussion About Physical Assets To Invest In
In conclusion, that’s how I would go about investing in physical assets. It’s not the only way. Just one way to think about setting your physical asset investment priorities.
Finally, here are all the tangible assets to invest in that we discussed today. They are itemized for your convenience. Followed by a summary of how I would approach buying the best physical investments.
Summary 1: Examples Of Physical Assets
Here is a summary of all the physical assets discussed today.
- Primary Residence
- Single-Family Homes
- Vacation Homes
- Rental Properties
- Apartment Buildings
- Raw Land
- Commercial Real Estate
- Industrial Real Estate
- Works of Art
Summary 2: Best Physical Assets To Buy
You have to make your own decision on where to begin investing in hard assets. But, here’s my opinion on how to prioritize your money for making the best physical asset investments:
- Primary residence
- Rental property
- A collectible or luxury item representing your hobby or leisure interest
More Reading On Investing And Investment Assets
My Favorite Resources For Asset Based Investing
- Manage your total financial picture with Personal Capital
- Invest in what you want with a self-directed IRA
- A resource for investing in farmland
- Buy and sell stocks and ETFs for free with the Webull app
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The only physical asset from the list of examples that I invest in, is my primary residence.