Thinkinvestor. Investments that provide emotional satisfaction

Buying assets is not always about monetary returns, although we need the returns to fulfil our life goals. In this article, we discuss assets that also provide emotional satisfaction.

There are two kinds of assets you will buy during your investing life with your savings — financial assets and physical assets. You get more emotional satisfaction holding physical assets than financial assets. This is because physical assets are touch-and-feel assets that carry a narrative. These assets include land and property, physical gold, and passion assets. Note that self-occupied house gives more emotional satisfaction that any other asset you may own. But it does not count as investment, as you do not buy the asset for monetary returns. Take passion assets. This includes antiques, arts and paintings and other rare collectibles. If you were to acquire these assets from an auction, you have a narrative to share with like-minded friends. A camphor wood chest may be a great piece of furniture. But a 19th century campaign chest offers great emotional satisfaction, given that is certified antique. The added benefit of passion assets is that they can become investment assets later when you are willing to part with them. A self-occupied house is similar. It is a consumption asset till you use it, but can become an investment asset when you are ready to sell it and monetise your home equity. But parting with physical assets is not easy. What about financial assets? You can get emotional satisfaction from your trading portfolio when you time the market-buying just before a stock moves up.

Conclusion

Your goal-based investments are about monetary returns because of the characteristics of the assets you carry in these portfolios — equity funds and bank deposits. With equity funds, you outsource the emotional satisfaction arising from market timing to a professional money manager. With bank deposits, monetary returns is all that matters, unless the stable returns from the deposits provide you emotional satisfaction. Investing in private equity and hedge funds can provide emotional satisfaction for two reasons. One, they are investments not all individuals may be willing to make because such assets are illiquid. And two, they qualify as value expressive investments given the required investment size.

(The author offers training programmes for individuals to manage their personal investments)

COMMENT NOW