The Investment Spectrum: From Stocks and Bonds to Designer Bags

Investments in art, such as expensive paintings, are commonly viewed as distinct from investments in stocks and bonds. They offer expressive returns by signaling wealth and emotional returns through aesthetic pleasure, as well as utilitarian returns from price appreciation.

I argue that all investments fall along a spectrum of utilitarian, expressive and emotional returns, with each providing the three returns in different proportions. The total return we derive from each investment product, service and behavior is the sum of these three returns.¹

Robinhood offers an example. In a 2021 interview, Robinhood CEO Vlad Tenev said, “Day trading may be more exciting, but it’s not the ‘bread and butter’ of the platform.” He added that most Robinhood customers are long-term buy-and-hold investors.²

By 2025, however, Tenev realized that day traders are the bread and butter of the Robinhood platform. Speaking to cheering customers at a 2025 Robinhood conference, Tenev, dressed as a race driver, compared trading to driving a race car.

“A finely tuned machine can make all the difference,” he said, “and that’s the role we feel Robinhood plays for our active investors.” Tenev noted that “customer trading generated more than half of Robinhood’s revenue, and 78% of that transaction-based revenue came from crypto and options trading.”³ He then directed his best people to serve active traders.

Robinhood user Abishek Gopal illustrates the expressive returns of an identity as a trader and the emotional returns of the rush of trading. He wakes up at 6:30 a.m. to trade “zero-day” options, which expire the same day they’re bought and require precise timing. “The thrill gets me going,” Gopal told the Wall Street Journal.⁴ “If $500 can get me $50,000 or $60,000, let me just try.” But those expressive and emotional returns likely come at the cost of utilitarian ones. A study of Robinhood users found that the stocks they bought most heavily each day trailed the market by an average of 4.7% over the following 20 trading days.⁵

Here are a few more examples that show where various investments and investor behaviors fall along the spectrum of utilitarian, expressive and emotional returns.

What Collectors Give Up

A study of returns on collectibles such as paintings, coins, violins and wine, covering periods of up to 110 years, found that they trailed stock and bond portfolios of similar risk by about 2.5% a year.⁶ In effect, collectors gave up that much in utilitarian returns in exchange for expressive returns from their identities as collectors and emotional returns from viewing their collections and showing them to others. Whether collectors end up with higher, lower or roughly equal total returns depends on whether their expressive and emotional gains outweigh their utilitarian sacrifice.

Logging In When Stocks Are Up

General news on radio, TV and online newscasts exposes investors to daily gains and losses in the Dow Jones, S&P 500^® and NASDAQ indexes, even if they do not seek them out. Investors are more likely to log in to their accounts to check their stock balances on days when stocks gain. This way, they enjoy the expressive and emotional returns of gains while avoiding the expressive and emotional costs of losses.

Investors often log in several times on weekends when they know their stock balances show gains, even though balances do not change on weekends. The expressive and emotional returns investors derive from watching their stock gains mirror those collectors derive from observing their collectibles. However, investors do not sacrifice utilitarian returns for their expressive and emotional returns.

Why Selling at a Loss Hurts

Imagine that you bought shares of a company for $50 per share, expecting the price to rise to $100. Instead, it declined to $30. Your utilitarian cost is $20 per share, whether you realize the loss or not, but you can recoup some of it through the tax benefits that accompany the realization of losses. Why, then, are so many investors reluctant to realize their losses? Part of the answer lies in regret, the painful emotional cost that accompanies the realization of losses.

We tend to distinguish “paper losses” from “realized losses” in our minds. Holding on to shares with paper losses leaves us hoping their prices will rise to the original break-even price. But that hope vanishes when we realize losses, replaced by regret. We procrastinate in realizing losses because we are reluctant to bear the pain of regret.

One remedy is the automatic realization of losses, which obscures the recognition of losses and removes responsibility from investors. Another is to call the realization of losses “harvesting losses,” as if it were as enjoyable as picking ripe peaches while strolling through an orchard.

What Our Homes Say About Us

Owned houses provide homeowners with immense utilitarian returns as both shelters and investments and are typically their most valuable assets. They also provide expressive and emotional benefits, including a sense of high social status and pride. Divya, a 33-year-old American woman, said: “My financial status enabled us to purchase this home that is well out of reach for many individuals in my age group and place in life. I felt proud that my family could make the decision to purchase this type of home. ...”⁷

Singaporeans pay more for houses with "lucky" addresses. The premium for larger apartments with lucky addresses on upper floors is especially high because these homes are highly visible symbols of wealth. By contrast, "haunted" houses carry utilitarian, expressive and emotional costs. Hong Kong apartment prices fall by 20% when they become haunted. Prices also fall by 5% for apartments on the same floor, 3% for those on the same block, and 1% for those on the same estate.⁸

Sometimes wealthy homeowners, such as Warren Buffett, enjoy expressive and emotional returns by forgoing the usual trappings of wealth. Choosing to live in a modest house when they can afford many mansions says, in effect, “I’m too smart to be fooled into buying a mansion when a modest house serves me well.” As Buffett told the BBC in 2009, “I’m warm in the winter, I’m cool in the summer, it’s convenient for me. I couldn’t imagine having a better house.”

Why Status Doesn’t Always Shout

Some emblems of high social status, such as fancy houses and luxury cars, offer their owners expressive and emotional returns because they are expensive and visible to everyone. Others are less expensive and offer similar returns while remaining inconspicuous to everyone except particular target groups.

Both high- and low-priced sunglasses and handbags are less likely than mid-priced products to display clear brand markers.⁹ Middle-class consumers prefer products with explicit markers that are widely recognized as status symbols. In contrast, upper-class consumers favor subtle markers that distinguish them from the middle class and signal their status to others in their target group.

Investments in handbags can be substantial. Standard leather Hermès Birkin bags range from $13,500 to about $20,000 in Hermès stores, while rare Birkin bags have sold for more than $450,000 at auction.¹⁰ Hermès enhances the expressive and emotional returns of its Birkin bags by limiting production and restricting who can buy directly from Hermès.

One Box for All Investments

Investments such as stocks and bonds are commonly kept in a separate box from the one that holds investments such as paintings and wine. I argue that all investments belong in a single box because they all provide utilitarian, expressive and emotional returns, albeit in varying proportions.

Sometimes it makes sense to sacrifice utilitarian returns for expressive and emotional ones. But we must carefully assess the expressive and emotional returns we gain and accurately estimate the utilitarian returns we give up.