It’s fair to say that traditional forms of investment have taken a hit in recent years.
Political uncertainties are creating an increasingly volatile environment, whether that’s Brexit negotiations in the UK, President Trump being, well, President Trump or the fluctuating nature of the Arab economy – it all makes an already complicated subject just that little bit more perplexing.
Is it any wonder then, that people are increasingly resorting to alternative investment strategies?
In this blog, we’ll discuss what alternatives there are and why the tried and tested options for stocks, bonds and cash investments may not be for you.
Option #1: Wine Investment
Fine wine investments often return an average yield of anywhere between 5 to 20% per annum over an extended period. However, if you’re particularly lucky, you could get your hands on wines that can appreciate by as much as 150%.
Fine wines have a reputation for massive fluctuations, due to environmental conditions in the most famous wine-making counties such as France and Italy. Having said that the most sought-after regions generally remain pretty stable, until supplies begin to deplete and who knows how much the prices will rise.
Master authorities in the alcohol game are incredibly discriminating, so if this is an avenue you’re genuinely interested in investing in, then you must ensure you’re keeping up with all the latest developments.
You must be able to put up a large sum up front to make wine a worthwhile investment. You’ll also need to invest in right storage options too – any wine connoisseur will be on top of this kind of thing, so consider your choices wisely.
Option #2: Art
Art is not everyone’s cup of tea.
However, investing at the right time in the right things can be a massive moneymaker since art isn’t subject to the same peaks and troughs as other more traditional assets.
However, to be a successful art investor, you must possess three key attributes: capital, composure and a good sense of what makes a great piece.
While art doesn’t run parallel to the market; it’s important to note that art can still be a volatile investment. For example, during the 1980s, the value of art was increasing by as much as 11% every year. Japanese investors were pouring a lot of capital into art investment, which gave the market a big boost, the same occurred during the mid-2000s with unprecedented sales. However, when the economy tanked in 2007, the market fell flat.
Is anyone thinking about investing in art when there’s so much else at stake?
However, once the market picks up again as it did in 2014, you’re in an excellent position to offload your investment for profit. Plus, are there any other investments that offer such aesthetic beauty?
Option #3: Gold
We’re living in trying times. Any small anomaly in any country in the world has the potential to skyrocket or drown markets; along with all the investors tied to them.
Scepticism of traditional markets, banking and big corporations is only natural after all we’ve seen over the last decade and this why so many are asking, ‘is gold investment a good idea?’
The answer to this is yes. Gold can preserve wealth, and this has been true for centuries. Gold commands attention and has proven to be an excellent buffer against economic uncertainties and inflation increases.
This is because gold holds value against the economy, so when the cost of living increases so does gold. When the economy collapses as it did in 2007 and the early 1990s gold prices soar.
One of the many benefits of gold is the fact that unlike most old-hat investments, you have a tangible, physical asset, which is ideal should something unexpected occur and you’re unable to get access to cash.
However, if you are considering buying and storing the gold yourself, you must consider your storage options.
Option #4: Coins
Money and the way we use it very much typifies our approach to modern life: fast and convenient. Contactless payments and apps are the most popular way to deal with currency, and of course, this is a great thing, but the lack of tact can make real money feel like a thing of the past.
This is why many have turned to coins to broaden their portfolio options, so if this is the strategy for you, bear these factors in mind.
Bullion coins are where the money is. These include the American Gold Eagle, the Canadian Maple Leaf, South African Krugerrand and The Queen’s Beasts coins.
Before you opt for coin investment, it might be worth delving into a little research. Collectable coins or ‘numismatic coins‘, are highly prized and commonly sell for significant figures to collectors all over the world.
Option #5: Commodities
Commodities include resources like livestock, crops, fossil fuels and metals like copper. The commodities market is a volatile market to your dip your toe into. Unless you’re able to predict the future, then it’s challenging to make a consistent return since natural disasters, and political upheaval can have a massive impact on unit price.
If you’re looking for more of a long-term option, then commodities can be an excellent choice. For example, when things took a downturn in the economy, oil and food prices were pushed upwards, which went meant commodity prices climbed alongside.
Oil and corn soared in 2010, which rewarded those who had invested in the years before the price hike.
Option #6: Hedge Funds
Hedge Funds pool capital from multiple investors and then poured into several different investments to make money for each investor. Hedge Funds allow much more freedom than other similar investments, which allows fund managers to choose from a broad range of opportunities such as stocks, commodities, futures and derivatives amongst others.
The lack of red tape, as it were, often yields positive results for both investor and manager, but from an investor point of view the barrier to entry is the highest on our list in terms of a minimum investment; up-front costs can sometimes set you back five hundred grand.
Option #7: Private Equity
Private equity invests money into a company that doesn’t issue public stock. Investors put capital into a company and receive returns once the company hits certain milestones.
Entrepreneurs often source private equity capital as a means to get their company off the ground. This is particularly prevalent when a company sits within fields such as communications, tech and generally companies who require expensive equipment and staff to make their company successful.
The success of your investment will depend more on the people running the company rather than what the company does, and this is what makes it quite a risky option: you’re investing in people.
This is precisely why many investors insist on helping to create management structures, marketing campaigns and product designs. Your return depends on the success of the company.
Option #8: Photography
An option that would have previously fallen under the ‘art’ category and one that is perhaps a little out there, but photography investments are becoming more prevalent. This is probably down to one factor: people love originality.
Photographers are well aware of the growing trend which is why they limit each photograph to only a few signed copies.
Photographers will never be able to repeat a shot like-for-like – no two photos are the same. The successful photographers that are lucky enough to produce public exhibitions will only create five to ten prints and keep the negatives, so potential investors are assured that these particular photos will never be available again.
Option #9: Property
Delving into property is one of the most popular alternative investment opportunities. However, the market is very prone to massive highs and crippling lows. Brexit in the UK has made a lot of would-be investors very nervous, and plenty of landlords are pulling the trigger and trying to offload their properties.
Buy-to-let is how most investors ease their way into property, usually providing a regular and reliable income. But, keep in mind things like tax, maintenance and lengthy court battles with the wrong type of tenants can sink any potential profits.
What many savvy folks now choose to do is buy properties on the cheap from auctions and the like, repair and replenish the home and sell it on for profit.
Any good investment portfolio must be as broad as possible. Each option should complement another, so if one dips, the other can prop it up.
Investing takes effort and patience. Nothing should be on a whim; you must take your time to build an effective portfolio that can hopefully build up your profit margins.
P.S. Many thanks to Karen James for providing this valuable material. Karen is a Financial Expert and a freelance blogger who enjoys walks with her chocolate lab Coco and spending time with her growing family.