Invest EUR 50,000 Tangible assets as a meaningful investment?

Highs are followed by lows: 2022 is not an easy year for investors. Many factors are causing uncertainty – the war in Ukraine, sanctions against Russia or the continuing rise in inflation. Most future projections are currently once again barely reliable. 

Conditions such as these affect the decisions made by many investors, whose nervousness is best reflected on the stock market. For example, the S&P500 equity index, which includes shares of the 500 largest listed US companies, achieved the worst result in the first 100 days of the year since 1970. 

If you want to invest 50,000 euros, the stock market is unlikely to be your first port of call right now. Rather, investors will try to reallocate their gains to date and hedge them as much as possible. 

As an alternative to exchange-traded investments, tangible assets can be used here as they enjoy a good reputation as a form of investment that is reliable and, above all, stable in terms of value. 

In this article, we therefore compare the most popular investments in tangible assets – after a refresher on the most important investment principles. This provides you with the optimal basis for approaching your next investment in a targeted manner and successfully investing 50,000 euros.

There is one characteristic feature in particular that distinguishes tangible assets from other forms of investment: they have material and physical intrinsic value. Traditional tangible assets are, for example, precious metals such as gold and silver or real estate, which combine various resources with their own value as structures made of concrete, stone, wood or glass. 

The asset class of tangible assets is a broad field and ranges from traditional assets such as precious metals and real estate to works of art, classic cars and watches. This gives you the opportunity – depending on your personal interest and expertise – to divide your capital across different assets within this asset class as well, thus achieving broad diversification.

Before you invest your 50,000 euros, it is advisable to get an idea of your financial situation: Check to see if you are still paying off any debts or loans. Make sure that your financial cushion is sufficient to be able to deal with any major purchases and expenses. Deduct any larger amounts due in the near future that you know of from your current budget. 

Consider your investment objective – and therefore also the period for which you can do without your invested capital. This will help you define your personal investment horizon.

On the one hand, you can use this question to find out your risk type. This allows you to select investments in a more targeted manner or to exclude investments that exceed your personal risk tolerance. 

On the other hand, it also helps you to narrow down your upcoming investment of over 50,000 euros. Do you prioritise safety, meaning that you will also accept lower returns? Or are you willing to invest in a higher risk class to achieve higher returns? 

The investment triangle, easily visualises the relationship between safety, returns and liquidity.

Every investment provides you with a balance between the three dimensions of safety, returns and liquidity. However, it is never possible to have the best of all three aspects at the same time. 

In the triangle, the further you move towards safety, for example, the more you have to compromise on either returns or liquidity – or both. If, in turn, you want to invest your capital without committing to long terms, you will either have to assume a higher risk or do without higher returns. 

In this way, the triangle can help you to better assess both your personal preferences and your next investment. 

In addition, it is worthwhile for investors who are risk-oriented and those who value safety to observe the fundamental principle of risk diversification: do not put all your eggs in one basket. 

What does that mean? Even if you want to focus on particularly stable investments, you should spread your investment capital across several safety-oriented investment products. This allows you to avoid the so-called cluster risk and ensure that the individual investments balance each other out in terms of risk by means of adequate diversification.

An investment in real estate pays off in many cases – that is certain. As tangible assets, they have intrinsic value and the ever-increasing demand on the real estate market generates profits for many investors and owners. 

The problem is that an investment amount of 50,000 euros is usually not sufficient to purchase your own property. But a real estate investment does not always mean owning your own home. Real estate funds, which allow you to invest in one or more properties along with other investors, are regarded as a popular alternative. Here, a distinction is made between open-end and closed-end real estate funds, and the two could not be more different.

Closed-end real estate funds are alternative investment funds that usually invest only in one or a few properties. Investors benefit from potential returns of around 3% to 5%. In order to participate, however, higher minimum investment amounts are usually required starting from around 5,000 euros, which fall due within a specified placement period. 

Closed real estate funds are usually also long-term investments with investment periods of 10 or more years. Early terminations are therefore often barely possible, as the sale of the shares often involves a great deal of effort and additional costs. 

If you are familiar with real estate and perhaps already hold another real estate investment in your portfolio, a closed-end real estate fund can offer good potential returns. However, if you invest in one or only a few properties, you cannot diversify widely – in this case, you are more likely to deal with a cluster risk which, in a worst case scenario, will result in a total loss of your investment. Closed-end real estate funds are therefore considered to be particularly risky and are only advisable for experts.

By investing in an open-end real estate fund, you avoid cluster risks and long maturities and invest in a wide range of high-quality properties, which are usually spread across different types of use and locations and thus contribute to risk diversification. Reliable returns are generated via rental income and sales. After observing the statutory minimum holding periods, you are free to sell or redeem your units. As a result, you can access to your capital again more easily without anticipating additional costs. 

Due to the current low-interest rate phase, yields are currently up to 3% – far higher than cash investments such as call money and fixed-term deposits or current accounts, but below the expected returns of alternative investments. Therefore, if you have 50,000 euros to invest and don't want to think about your investment afterwards, then an open-end real estate fund is a good, reliable investment opportunity for you. However, if you also want to achieve decent profits with your capital, you can also invest a part of it in an open-end real estate fund at low risk and aim for higher returns with the rest.

Renewable energy is a comparatively new and thus still underrepresented investment segment. Investors in this segment benefit from tangible assets such as wind power or solar systems, which generate consistent cash flows over many years thanks to power purchase agreements. The fluctuations in value are very low, as long-term purchase agreements are often used for hedging purposes. However, sustainable added value also makes an investment in renewable energy promising and sustainable. 

Many investment products that invest in renewable energy are not open to retail investors, but reserved for companies and institutions. The opportunities and risks of such investment products are also often more difficult to assess. 

However, a renewable energy investment can certainly be worthwhile – which is why we present two investment options here:

Crowdinvesting is the financing of projects with the help of a group of investors. Through a crowdinvesting platform, you usually have access to a wide range of projects available to you for an investment.  

However, it is your job to deal with the various projects and find a suitable investment. They all look promising when you read the sales prospectuses, but you have to assess for yourself how great the risks actually are. 

However, there are also a number of advantages: on the one hand, you usually benefit from good potential returns when crowdinvesting, and on the other from full transparency about your investment project, including the investment objective, concept and project owners. 

This means that you need to trust the project you have selected – which entails a risk of total loss of your capital invested. In particular when it comes to new investment segments, such as renewable energy, retail investors often lack the experience to realistically assess the opportunities and risks – and the same applies to project owners. Especially when competing for the most promising assets in an emerging market such as renewable energy, many issuers have difficulty asserting themselves against large fund providers. 

What else needs to be taken into account when crowdinvesting: the German Capital Investment Act (Vermögensanlagengesetz) currently defines a maximum investment amount of 25,000 euros per investor, with a maximum total volume of 6 million euros per project. 

So if you want to invest 50,000 euros and crowdinvesting is your investment of choice, you have the option of spreading your capital across several projects.

There are different forms of impact funds, but tangible asset impact funds allow you to invest in renewable energies widely diversified and with a real, measurable impact. Since a legislative change in 2016, open-end mutual funds have also been launched in this segment, which invest in a wide range of assets in a highly diversified manner – from wind farms and solar parks to waterworks. Active fund management takes care of the selection process, contract negotiation and the possible sale of assets.

In their simplicity, such impact funds are therefore similar to open-end real estate funds, while they are more likely to be among the funds with high returns in terms of earnings prospects, similar to closed-end real estate funds. In view of the key figure of risk-adjusted returns, they are therefore quite attractive.

That’s why this investment may be suitable for you if you want to invest more than 50,000 euros. In our klimaVest impact fund, you can even invest from as little as 10,000 euros – broadly diversified and with attractive potential returns. This makes klimaVest suitable as a single investment as well as in combination with another capital investment as a starting point for your next investment.

At the same time, the klimaVest impact fund gives you the assurance that you are making a real, sustainable and transparent contribution to climate change mitigation – and that you are invested in the emerging renewable energies segment.

Precious metals are considered to be the ultimate crisis-proof currency: in times of inflation and economic turmoil, precious metals tend to perform in the opposite way to the stock market – and thus retain their value even if other assets fall victim to price fluctuations and slumps on the stock market. In addition, the precious metals market is not only large, but also international: buying and selling is therefore uncomplicated and possible at virtually any time. 

And this is where the crux lies. After all, recent years have shown that the economy and the financial market can react quickly in the event of a crisis. For example, an investment in precious metals at the wrong time can turn out to be an unfortunate counter-cyclical investment: you invest in the face of a crisis – or several crises, as is currently the case – and when the crisis soon eases, the stock market regains momentum, while the price of precious metals quickly falls again. 

Renewable energies are therefore increasingly seen as a sensible alternative not only to the stock market, but also to the famous “crisis currency” – the motto here is: green is the new gold.

Before you take your capital and invest 50,000 euros all in one go, it is worth not only examining your own preferences and prerequisites in advance, but also keeping an eye on current developments and trends on the financial market in order to make your next investment as future-proof as possible.  

With the current crises in mind – from the ongoing coronavirus pandemic to the war in Ukraine and rising inflation – it may well be worthwhile investing in tangible assets and thus becoming more independent of stock market fluctuations. Depending on your risk tolerance, low-risk open-end real estate funds, a financial investment in renewable energy or an investment in precious metals – or a combination of various investments – may be ideal for this purpose. 

The current turbulences in the global economy are definitely putting the financial market to the test. At the same time, this also creates new opportunities: you now have the opportunity to broaden and stabilise your investments and make your portfolio fit for the future. With an investment amount of 50,000 euros, you can make a long-term contribution to maintaining or growing your assets – even without the stock market.