Fine art

It’s easy to see why great works of art often hit new highs when they show up at auction: The supply is limited, and many famous pieces have already been snatched up by museums and collectors.

Investing in artwork can help you hedge against inflation — but it can do more than that.

Art is also a popular way to diversify because it's a “real” physical asset with little correlation to the stock market. In fact, contemporary artwork has outperformed the S&P 500 by a commanding 174% over the past 25 years, according to the Citi Global Art Market chart.

According to Deloitte’s latest Art & Finance Report, 85% of wealth managers in 2021 believed art should be included as part of a wealth management service.

It’s true that investing in fine art by the likes of Banksy and Andy Warhol used to be an option only for the ultra-rich.

But with a new investing platform called Masterworks, you can invest in iconic artworks too, just like Jeff Bezos and Peggy Guggenheim do.

More: Why investing in fine art could be a smart move

Real estate

Real estate is a well-known hedge against inflation. As the price of raw materials and labor goes up, new properties are more expensive to build. And that drives up the price of existing real estate.

Well-chosen properties can provide more than just price appreciation. Investors also get to earn a steady stream of rental income.

But while we all like the idea of collecting passive income, being a landlord does come with its hassles, like fixing leaky faucets and dealing with difficult tenants.

These days, however, you have a variety of options to invest in real estate without becoming a landlord.

Real estate investment trusts (REITs), for instance, own income-producing real estate like apartment buildings, shopping centers and office towers. Many REITs trade on the stock market, so investors can buy and sell them throughout the trading day.

And while buying a house usually requires a hefty down payment and a mortgage, you can buy shares in a REIT with as much money as you are willing to spend.

Crowdfunding platforms have become another popular option as they allow investors to own a percentage of physical real estate.

For instance, CrowdStreet is a private equity real estate investing platform that allows accredited investors to participate in individual deals, with a minimum investment of $25,000.

You’ll gain exposure to high-end properties that big-time real estate moguls usually have access to — from commercial developments in LA to residential buildings in NYC.

The goal is the same as being a landlord yourself: to earn regular rental income — in this case, distributions — plus profit when the property eventually sells.

Fine wine

People have been consuming wine for thousands of years. While most collect wine for enjoyment rather than investment, bottles of fine wine become rarer and potentially more valuable as time goes by.

Since 2005, Sotheby’s Fine Wine Index has gone up 316%.

As a real asset, fine wine can also provide the diversification you need to protect your portfolio against the volatile effects of inflation and recession.

When the Dow Jones plummeted 22.7% during the COVID-19 recession, fine wine fell only 1.4%.

You can invest in wine by purchasing individual bottles — but you’ll need a place to store them properly. Residential wine cellars often cost tens of thousands of dollars. If not stored at the right temperature or humidity, the bottle could be compromised.

That’s why some investors choose to go with a wine investing platform called Vinovest. The company can buy fine wine at below-retail prices through its connections and handle the storage for you. Your bottles would also be insured against breakage and loss.

Vinovest automatically selects the best wines for your portfolio based on your goals, and it tells you the best times to sell to get the best value for your wine.

And because you actually own the bottles, you can always have the wine shipped to you to enjoy if you so desire.

More: Suze Orman’s tips to get you through inflation and stock market dips.

Farmland

Thanks to inflation, we have to budget more for groceries. But for those that follow the commodities market, rising food prices shouldn’t come as a surprise: the prices of corn, soybeans and sugar have been trending up since mid 2020.

Agriculture is not an exciting sector, but it’s the backbone of our civilization. Whether boom or bust (or hyperinflation), people still need to eat.

You can invest in agriculture-related stocks. Or, you can invest in farmland itself.

Last year, legendary investor Jim Rogers said if you love farming, you should go get a farm and “you’ll get very, very, very rich.”

And it just so happens that Bill Gates is now the largest private farmland owner in the U.S.

The best part: You can invest in farmland without getting your hands dirty.

Publicly traded REITs specialize in owning farmland, such as Gladstone Land Corp and Farmland Partners.

At the same time, there’s an all-in-one investment platform called FarmTogether that allows you to invest in farmland by taking a stake in a farm of your choice.

You’ll earn cash income from the leasing fees and crop sales — and any long-term appreciation on top of that.

About the Author

Jing Pan

Jing Pan

Investment Reporter

Jing is an investment reporter for MoneyWise. Prior to joining the team, he was a research analyst and editor at one of the leading financial publishing companies in North America. An avid advocate of investing for passive income, he wrote a monthly dividend stock newsletter for the better half of the past decade. Jing holds a Master’s Degree in Economics and an Honours Bachelor of Science Degree, both from the University of Toronto.

What to Read Next

What to know about high-frequency trading

New technologies have always amplified the speed at which securities shares change hands.