Tesla Inc. (NASDAQ: TSLA) CEO Elon Musk’s recent $44 billion attempt to purchase Twitter Inc. (NYSE: TWTR) captured the front page daily in recent months. As the deal fell through, however, Musk once again roused the social media platform, seemingly setting his sights on another asset: Premier League franchise Manchester United.
“I’m buying Manchester United ur welcome,” Musk wrote after the club suffered a 4-0 road loss to Brentford. The tweet caused shares of the club (NYSE: MANU) to rise 17% in premarket trading. Hours later, however, Musk revealed that he wasn’t serious. “This is a long-running joke on Twitter,” he replied to a user. “I’m not buying any sports teams.”
The Tesla CEO is a known troll, but occasionally he uses Twitter to offer a sincere look into his trading philosophy. In a March tweet, the tech mogul advised his followers, “it is generally better to own physical things like a home or stock in companies you think make good products, than dollars when inflation is high.”
Investors like Musk see the value in shares of a social media giant, or football club. But most billionaires’ portfolios are also diversified across physical assets which lets them ride out market volatility. Here are some ways you can use this strategy for yourself.
Warehouse Real Estate
Real estate is one of the largest and most well-known real assets out there. As Musk alluded to in his tweet, a real estate portfolio can be as simple as a primary residence or other residential property. In fact, there’s one type of property picking up steam— warehouses.
Logistics facilities like warehouses are critical to our economy, particularly as consumers have embraced online shopping. Warehouses may not seem like exciting pieces of property, but investors of Prologis, the warehouse-focused REIT, aren’t complaining. it has delivered a total return — stock price appreciation plus dividends earned — of more than 200% over the past five years.
Though real estate prices are at their highest levels in years, there may still be deals to be found in certain markets.
Many of the investors Elon attempted to bring into the proposed Twitter deal are alternative asset managers like venture capital firms and hedge funds. According to Bloomberg, firms like these have been embracing gold as a store of value against price increases.
Gold is viewed as a portfolio diversifier and inflationary hedge because investors have historically flocked to it when markets are choppy. Also, it has continued to maintain its value through numerous market cycles.
Following a slump from 2013-2019, gold prices have continued to rise in recent years. Prices have come down since the beginning of the year, but remain near all time highs.
A Finer Alternative
Elon has become one of the leading figures in the growing digital art world, but he also has connections in the more established physical art market. In 2018, Musk struck a deal with Japanese billionaire art collector Yusaku Maezawa to send a group of select artists to the moon in SpaceX’s Big Falcon Rocket. The journey will begin in 2023.
Art as an asset class could be the investment you absolutely need for 2022 and beyond.
Contemporary art prices outperformed the S&P 500 returns by a commanding 164% over the past 25 years, according to Citi. And investing in art is becoming a popular way to diversify because it’s a real, physical asset with little correlation to the stock market.
On a scale of -1 to +1, with 0 representing no link at all, Citi found the correlation between contemporary art and stocks was just -.04 during the past 25 years.
Earlier this year, Bank of America investment chief Michael Harnett singled out artwork as a sharp way to potentially outperform over the next decade — due largely to the asset’s track record as an inflation hedge.
As demand has risen for high-quality real assets and portfolio diversification, alternative investment platforms have opened the doors to this market. Thanks to these advancements, investors don’t need billions of dollars to get access to high-end, blue-chip works. Explore blue-chip art investment opportunities at Masterworks
Masterworks' mission is to democratize the art investing world and help people tap into an investment previously exclusive to the ultra wealthy. We are the only platform that lets you invest in multi-million dollar works of art by artists like Basquiat, Picasso, Banksy, and more.
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