Chartered Accountants

Tips on Unconventional Investments

Shares, trust units, property and bonds are the "meat & three vege" of investments. What else is on the menu?

Other more unusual dishes include collectables, coins, antiques, stamps, art and gold. They can offer a good return, but they are not for the faint hearted or the impatient, just the same as the share market.

Golden rule number 1 is ..... the higher the return, the higher the risk.

Golden rule number 2 is ..... if it looks too good to be true, it probably is.

Golden rule number 3 is ..... rubbish is rubbish, a dog is a dog etc.

It is the same story as with share investments ..... purchase quality, quality, quality

Investing in unconventional investments like art, stamps, antiques etc can be just as risky as a share market investment. Every market, be it for conventional or unconventional investments can be fickle.

The market for unconventional investments can be small. If the market is small then buyers may dictate the price. As the price of an item increases the market for it may shrink.

Some artists, craftsman, particular era or categories of unconventional investments are good for the short term while others will have a long term future.

Investors (buyers) should take the time to develop some knowledge of the unconventional investment and the factors, which influence its current price and future price.

You simply cannot collect anything and everything irrespective of its merit, history or whatever makes its value tick. What are its KPI's.....key performance indicators.

Not all property increases at the same rate. The share price of all shares doesn't rise by the same amount. Some are better than others. If you don't understand the "product", do not invest in it.

Unconventional investments don't usually have an income stream, however art, sculptors and some other collectibles can be displayed for a "visual" return on the investment.

Advice from professionals, fellow collectors and dealer should be obtained before investing in an unconventional investment.

Rare coins generally show a good appreciation in value. They also provide a highly portable and tangible investment and can usually be purchased in "sets" from coin dealers.

As there is no income stream tax problems are minimal unless trading is done as a business. However there can be substantial short term movements in price, so coins should be seen as long term investments.

Like coins, rare bank notes show good returns but again there is no income stream. No income tax problems arise unless trading is done as a business.

Art can be a satisfying purchase but as an investment its record has been mixed. Much of the art market is driven by short term trends although a major painting by well known artists will probably retains its value.

Following the fashions of the art world can be a full time occupation or can require expensive specialist advice.

Gold has long been thought of as the ultimate resting for wealth. Gold generally increases in value in times of financial crisis, so it could be a sound investment if you are pessimistic about the global economic outlook.

This could account for the current increase in the value of gold and the share price of gold mining companies. The easiest way to acquire and store gold is to purchase coins.

Another unconventional investment with a chequered history is an investment in exotic primary products. Many have performed poorly. The last few years have seen considerable investment in ostriches, emus, alpacas and olives, and of course there is pine trees. Advertisements frequently project large returns.

Any prospectus for exotic primary products or new agricultural investments should be examined with even greater care than usual.

A potential investor should realise that in any new field, scarcity value can inflate apparent returns. Nevertheless, there are good returns to be made in the primary sector for the careful investor, but it can be a long time coming.

There are a large number of variables to consider. Again professional advice should be obtained before investing in this area.

Don't forget to protect these unconventional investments, which are usually tangible. Protection includes correct storage and maintenance plus maybe insurance cover.

Every asset is a must be maintained, protected and so forth.

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