Collectible investments: the hidden cost of owning what you love
- Robin Powell
- 5 hours ago
- 10 min read
Collectible investments carry a hidden cost that most owners never see. New research spanning 110 years has measured the price of loving what you own, and the findings reach far beyond art and wine into the heart of almost every portfolio.
You know the feeling. You're at a viewing, or scrolling through an auction catalogue late at night, and something stops you. A painting. A first edition. A watch with a particular face. You had a budget. You forget it. The object wins, and you tell yourself it's fine because it's an investment too.
Everyone has a version of this story. The justification comes easily because it feels true. Beautiful things hold their value. Rare things appreciate. And owning something you love, something you can see and touch, surely that counts for something.
It does count. But it costs more than you think.
The Knight Frank Luxury Investment Index fell 3.3% in 2024, its second consecutive annual decline. Art dropped 18.3%. Wine was down 9.1%. Classic cars barely moved. And while collectibles stumbled, equity markets pulled further ahead. Over the past five and ten years, Knight Frank's own data shows conventional financial assets consistently outperforming the luxury categories the index tracks.
Something is dragging on collectible returns beyond normal market cycles. Not bad luck. Not poor timing. Something structural, built into the very nature of owning things you love.
A landmark study, published this year in the Financial Analysts Journal, has identified what that something is. It has a name, a mechanism and a price tag. And it affects far more than the contents of your wine cellar.
Your feelings have a management charge
Owning beautiful things costs roughly 2.6 percentage points of annual financial return. That's the central finding from the most comprehensive study of collectible investments ever conducted, and the figure is probably conservative.
Elroy Dimson is one of the world's foremost financial historians. Emeritus Professor of Finance at London Business School and chair of the Centre for Endowment Asset Management at Cambridge Judge Business School, he co-authored Triumph of the Optimists and compiles the annual Global Investment Returns Yearbook. His earlier research with Christophe Spaenjers established that collectibles had outperformed bonds and gold over the long run but consistently lagged equities, and that the costs and risks of these 'emotional assets' were routinely underestimated. The new paper goes further. Working with Kuntara Pukthuanthong and Blair Vorsatz, Dimson set out to answer the question the earlier work left open: how much does the emotional satisfaction of ownership cost in foregone financial return?
To find out, they analysed up to 110 years of returns across 13 collectible asset classes, from paintings and sculptures to stamps, coins, wine, classic cars, violins, furniture, rugs and jewellery. Using factor-mimicking portfolios of liquid securities and machine learning techniques, they isolated what a purely financial investor would have earned from comparable risk exposure, then measured the gap. That gap is the emotional yield: the return collectors silently forfeit for the satisfaction of owning what they own.
24 of 30 return series showed positive emotional yields, with an annualised mean of 2.64%. Think of it as an invisible management charge. No fund factsheet lists 'emotional satisfaction: 2.6% p.a.' But it's there in the price, deducted every year, compounding quietly for decades.
The mechanism is simple. When buyers derive pleasure from owning an asset, they bid prices above what a cold-eyed financial buyer would pay. Higher entry prices mean lower future returns. You're paying a fee. You're just paying it to yourself.
What's striking is how the charge varies. The paper groups collectibles into three types. Private-domain assets, things like antique furniture and fine rugs that you enjoy at home, carry an average emotional yield of 9.55%. Public-domain collectibles, fine art and jewellery that signal status more broadly, average 2.28%. Specialist-domain assets, wine, stamps, classic cars and coins, appreciated mainly within collector communities, average 0.45%.
The pattern is intuitive but the scale is not. The things you love most privately cost you most financially.
And 2.6% is a floor, not a ceiling. The researchers excluded transaction costs, ignored the superior liquidity of conventional securities and relied on repeat-sales indices that are already biased upward. Each of those factors would push the true figure higher. This is fee archaeology of a different kind, and the real charge is larger than the headline number suggests.
Collectible investment funds: all the cost, none of the joy
The fund industry has found a way to make this worse. When passion assets are packaged into funds or sold as fractional shares, the emotional return gets stripped out, but the weak financial return stays where it is. You end up paying the fee without receiving the thing it was supposed to buy you.
The pitch sounds compelling. Art funds, wine funds, tokenised whisky, fractional ownership platforms offering shares in blue-chip paintings and vintage Porsches. The language is always about 'democratising access' to asset classes previously reserved for the ultra-wealthy. And the barriers to entry have fallen. For a few hundred pounds, you can now own a sliver of a Basquiat.
But think about what you're buying. A fractional share in a painting stored in a freeport you'll never visit. A case of Burgundy in a bonded warehouse you'll never drink. A percentage of a classic car you'll never drive on a Sunday morning. The emotional yield has been removed. Yet the price still reflects a market in which emotional buyers set valuations. You accept returns shaped by other people's enjoyment while getting none of it yourself.
The Dimson et al. paper is unusually direct on this point. It describes fractional platforms that vault assets as 'structurally flawed', offering what it calls 'the lower returns of a passion asset without the passion'. For these products to compete with conventional equities, the authors argue, platforms would need to monetise the emotional yield somehow, perhaps through museum lending or corporate display. Without that, investors hold a dominated asset class.
This is the complexity tax in its purest form. The industry takes a simple pleasure, owning something beautiful, and repackages it into a financial product that delivers neither satisfaction nor competitive returns, then adds management fees, storage charges and platform costs on top. At major London auction houses, buyer's premiums alone now run to 27% or 28% on the first million pounds. Round-trip transaction costs for a typical collectible can reach 25% to 35% of the asset's value.
In an earlier interview on TEBI, Dimson made the point simply: the appropriate person to collect high-quality stamps is the person who finds them beautiful. Remove the beauty and keep only the financial shell, and the logic collapses.
The FCA has noticed, too. In recent years it has issued thousands of warnings about unauthorised firms marketing high-risk and alternative investments to UK consumers. If you're considering a collectible investment platform, checking the Financial Services Register isn't optional. It's the minimum.
Four places you're already paying this fee
Collectible investments aren't the only place where feelings quietly erode financial returns. The emotional yield operates wherever attachment, loyalty, excitement or moral satisfaction shapes what you hold and what you'll accept for holding it. Most investors are paying this charge somewhere in their portfolio already. They don't call it that.
Your home. For UK investors, property is the emotional asset. The cultural attachment to bricks and mortar runs deeper here than almost anywhere else in the world. And the emotional yield framework helps explain something that frustrates financial planners: why housing returns, on a risk-adjusted basis, are often weaker than owners assume. Once you account for maintenance, insurance, stamp duty, illiquidity and the opportunity cost of concentrating so much capital in a single asset, the numbers look less impressive. The Dimson paper itself flags residential real estate as a natural extension of the concept. People accept these costs gladly because they love where they live. That's a legitimate choice. But it is a choice, and it has a price.
Your employer's stock. Familiarity breeds overconfidence. Employees who hold large positions in their company's shares often do so from loyalty, identity or the comfort of feeling they 'know' the business from the inside. These are emotional yields by another name: non-financial satisfactions that come with ownership. The research on employer stock concentration is consistent. It increases portfolio risk without improving expected returns. The attachment is real. So is the diversification penalty.
'Fun' stocks and crypto. The buzz of owning Tesla, a meme stock or Bitcoin isn't purely financial. It's social. Tribal. Identity-driven. These assets generate passionate online communities and fierce defence from holders even through steep drawdowns. That excitement is itself a form of emotional yield. And the Dimson framework suggests it may hold down expected returns relative to what cold financial fundamentals would predict. It partly explains why speculative assets can sustain valuations that puzzle conventional analysts for so long.
ESG investments. The Dimson paper draws explicitly on the theoretical work of Pástor, Stambaugh and Taylor, who predicted that sustainable investments would deliver lower financial returns in equilibrium precisely because investors derive non-financial satisfaction from holding them. The collectibles data supports that prediction. If moral satisfaction from owning green or ethical funds functions as an emotional yield, the same mechanism applies: buyers bid up prices, which lowers future returns. That's not an argument against ESG investing. But it is an argument for making the trade-off consciously. If you're willing to accept a modestly lower expected return for the satisfaction of aligning your money with your values, that's a perfectly rational decision. The problem arises when you don't realise you're making it.
In every case, the satisfaction is real and often valuable on its own terms. But it carries a financial cost, and that cost doesn't appear on any factsheet.
Three ways to stop paying fees you can't see
You don't need to drain all feeling from your financial life. You do need to know when emotion is costing you money, and whether you're getting enough in return.
Separate the collection from the portfolio. If you love wine, art or classic cars, enjoy them honestly, as sources of pleasure. Don't kid yourself that they're pulling their weight as investments. Keep your core wealth in low-cost, diversified index funds where emotional yields don't quietly eat your returns. That ~2.6% annual drag might sound modest in any single year. Compounded over 30 years, it's devastating. A £100,000 investment growing at 7% reaches roughly £761,000 over three decades. Knock 2.6 percentage points off and you get about £345,000. The gap is the price of love, paid in instalments so small you never notice. Let your passions be passions. Let your portfolio be a portfolio.
Be sceptical of 'investable' collectibles. Any fund or platform selling collectible investments as a financial product is offering you the diminished returns without the emotional compensation. Before you buy a fractional share in anything, ask one question: am I getting the enjoyment, or the underperformance? If you can't hang it on your wall, open it with friends or drive it on a Sunday morning, the emotional yield is zero. But you're still paying for it in lower returns. That's not democratised access to a new asset class. It's a worse deal than the one collectors already get.
Audit your portfolio for emotional attachments. Your home, your employer's stock, your favourite holding, the fund you've had since your twenties. Wherever you feel a strong emotional reason to hold something, that's where the invisible fee is probably at work. You don't have to sell. But you should know you're paying for the privilege and account for it in how you allocate the rest. If half your net worth sits in your house and you also hold a concentrated position in your employer's shares, you're paying the emotional yield twice over, with almost no diversification to show for it.
Understanding all this doesn't make you a colder investor. It makes you a more honest one. You can still love what you own. You stop mistaking that love for a free lunch.
The price of pleasure is worth knowing
That moment at the auction, when you forgot your budget and let the object win. It wasn't irrational. It was human. People have been paying more for things they love since long before anyone thought to measure it.
But now someone has measured it. Roughly 2.6 percentage points a year, across 110 years of data and 13 asset classes. Compounding silently. And operating not just in collectible investments but in property, in employer stock, in the speculative thrill of a favourite holding, in the quiet satisfaction of investing according to your values.
The Dimson research doesn't ask you to stop feeling. It asks you to notice when those feelings are picking up a tab. Evidence-based investors don't pretend they're immune to the pull of beautiful, familiar or exciting things. They refuse to let that pull set their asset allocation. They keep their pleasures and their portfolios in separate rooms. And when the industry tries to sell them the lower return without the pleasure attached, they walk away.
You can love what you own. You can collect what moves you. You can hold investments that reflect who you are. Know what each of those decisions costs, and make it on purpose.
The most expensive fees in your portfolio may not be the ones your fund manager charges.
They may be the ones you've been charging yourself.
Resources
Dimson, E., & Spaenjers, C. (2014). Investing in emotional assets. Financial Analysts Journal, 70(2), 18-22.
Dimson, E., Pukthuanthong, K., & Vorsatz, B. (2026). Emotional yields of collectibles. Financial Analysts Journal. Advance online publication.
Pástor, L., Stambaugh, R. F., & Taylor, L. A. (2021). Sustainable investing in equilibrium. Journal of Financial Economics, 142(2), 550-571.
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