How Crypto & Collectibles Fit in Short-Term & Long-Term Financial Plans

There is a lot that goes into building wealth and financial security over the course of a life. At some point, even the youngest investor and even those in school are going to be nearing retirement age. It is important to consider all aspects of your financial saving and spending along the way of your life. Collectibles and crypto can play a role in this journey.

Collectors Dashboard evaluates high-end collectibles as an alternative asset class. This implies that buyers are using the same capital that could have been invested in stocks and bonds. While Collectors Dashboard is not a financial advisory service, it seems a very safe bet that no financial advisor in the country would recommend for their clients to only be invested in alternative asset classes.

What about short-term buying versus long-term buying? Outside of lottery winners and being in the lucky gene club, it takes many small accomplishments to add up to long-term success. This rule applies to everything — careers, health, retirement, walking a mile and so on.

Collectors Dashboard routinely screens news and press releases about how collectibles (including digital assets) play a role, both positively and negatively, in personal finance. In the spirit of transparency, there are positive and negative aspects of collectibles as an alternative asset class. If you get no guarantees for gains in stocks and bonds, should anyone expect guaranteed profits in alternative assets?

One search in the first week of 2022 led to a report from M1 Finance, which refers to itself as the Finance Super App. They evaluated short-term and long-term activities in those who are in “financial freedom” versus those who are in “financial survival.” They included collectibles and cryptocurrencies in this study as well.

M1’s study gets to two points right up front. The first point (its headline synopsis) says it all — long-term investors are more likely to feel financially free than short-term investors. Their study also states right off the bat that short-term investors are more likely to invest in alternative assets like cryptocurrency and collectibles.

Much attention has been given to collectibles and cryptocurrencies in the public and financial media over 2021 and at the start of 2022. This is at a time when people are quitting their jobs in record numbers, home values have exploded higher, and the stock market has hit all-time highs.

The first thing we wanted to look at was M1’s study efforts and methodology. They pooled a diverse group of more than 2,000 investors who had at least $10,000.00 in investable assets during the month of November 2021. M1 defined those in “financial freedom” as having enough savings, investments and cash to effectively live how they want. Those in “financial survival” are defined as “being worried about covering basic living expenses (food, shelter, clothing).” Long-term refers to those with a time horizon of 10 years or more for at least 50% of their investable assets — and short-term refers to those with at least 50% of their investable assets in a horizon of less than a year.

M1’s pool for the study is rather large financially as well. The company’s latest press release indicated that it had over $6 billion in assets under management. It also states that it has empowered hundreds of thousands of investors to open accounts and improve their financial well-being.

According to M1, the investors who have attained financial freedom are more likely than those in survival mode to apply long-term oriented investment strategies to their portfolio. Their stats:

  • 18% of long-term investors say they are financially free!
  • 8% of short-term investors say they are financially free!

Another result from M1’s study showed that half of the respondents in financial survival mode were trading more frequently than they did a year ago. Only 39% of those in financial freedom were trading more frequently. There is a huge aspect of how traditional assets and alternative assets play a role here in financial freedom versus financial survival in M1’s study:

The top investing strategies of those who have reached financial freedom are long-term oriented: growth investing (45% vs 31% for those in financial survival), diversification (44% vs 22%), buy and hold (40% vs 22%) and dividend investing (37% vs 22%).

Those in a state of financial survival are more likely to invest in alternative assets, including more volatile asset classes like cryptocurrency. M1’s study showed:

  • 73% of those in financial survival plan to invest in some form of alternative asset in the next 12 months.
  • 54% of the financially free in the survey plan to invest in some form of alternative asset in the next 12 months.

There were other key issues that were shown about those who are in a state of financial survival. M1 indicated that the financial survival group is twice as likely to invest in art or collectibles (20%) in the next 12 months as the financially free (10%). Another aspect of the short-term and financial survival views were also shown:

Younger investors, short-term investors and investors in a state of financial survival are most likely to turn to social media for financial guidance, with over half of all Gen Z and Millennials stating that they have taken an investment action as a result of social media.

As for the crypto investors and the “crypto curious,” M1’s data indicated standout trends among the various groups:

Short-term investors and those in a state of financial survival were more likely to have made a cryptocurrency investment over the past year than their financially free and long-term investor counterparts. Over 60% of Gen Z and Millennial investors report making an investment in cryptocurrency at some point in the past 12 months.

Nearly a third (29% and 31%) of long-term and financially free investors are planning an investment in cryptocurrency over the next 12 months. The next-highest alternative asset class for both groups is real estate, at 27% and 24%, respectively.

While M1’s business is focused on long-term strategies, it is always interesting to see results of studies that apply short-term, long-term, traditional investing, alternative assets and other aspects. And perhaps the M1 CEO & Founder (Brian Barnes) leaves one key capstone lesson here:

“It is almost impossible to scroll through social media or watch the news without hearing about someone hitting the jackpot through the latest meme stock or cryptocurrency. It might seem at times like we have entered a new era of instant gratification when it comes to money management. But we’ve found that people are still prioritizing investing with a long-term focus. The road to financial freedom is paved with many small decisions and positive habits developed over time, rather than one impulsive moment.”

Collectors Dashboard welcomes financial and social studies that include traditional asset classes (stocks and bonds) and alternative asset classes (including crypto and collectibles). Millions of people have purchased cryptocurrencies and digital assets in recent years. It is unknown how many people have only recently “invested” into collectibles (directly or fractionally), but it is very obvious there are still exponentially more investors who have traditional assets like stocks and bonds.

More studies of traditional asset classes and alternative assets classes will be reviewed as they are released. Collectors Dashboard may evaluate collectibles, but it should be more than obvious that traditional asset classes should have a very strong role in your long-term financial plans.