Alternative investments: Have you ever considered investing in art, gold, or wine?
Does the thought of investing in indices, equities, or futures make you yawn? Don’t worry, you still have a place in the investment world. There are many other options for investments out there that might catch your eye. Some of them are kinds of commodities that you might have heard about in the news — such as art, gold, and wine.
However, before you jump into the market of any of these, what’s important for you to know? Who’s most likely to profit from investing in these? What are the benefits, and what are the risks involved? I have been investing for a few decades now, and I’ve learned a thing or two about these alternative investments. Allow me to share this knowledge with you.
Art: emotions might distract you
The art investment market does have a certain appeal to it. Why? Because the fundamental difference between this market and others is that it might involve personal taste, and therefore — emotion. That’s the first thing I wish to warn you about: Rule number one for successful investments in art is to overcome your taste. Stay focused on what will most likely bring you profit, regardless of our aesthetic views and preferences.
While in other markets, such as the stock market, taking actions according to confidential inside-knowledge is forbidden and punishable — in the art market it’s necessary for success. That’s why an investor, who wishes to make a profit in this field, ought to be knowledgeable and experienced. And that takes a while.
Gold: short term vs long term
Are you familiar with the axiom, according to which the value of precious metals increases constantly? Well, I hope you haven’t decided to enter the world of gold investments because of this idea. Don’t get me wrong, it’s some what true, but not entirely true. The constant growth in the value of precious metals as gold is real, but mainly in the long run. Gold is sometimes called a ‘crisis asset’ — meaning it preserves its value through periods of inflation and armed conflicts, while other assets might be volatile. But in times of economic growth, gold might experience a decrease in value, or be less profitable than other assets.
Keep in mind the collateral expenses that investing in gold includes. In its physical form, gold isn’t an easy commodity to trade, and especially store: The Romanian bank BCR, for example, redeems deposited gold if it’s kept in the bank’s safes. The redeeming price is lower than the purchase price.
These obstacles might cause minor investors to refrain from gold investments. However, if you decide to stick with the gold market, there are other, indirect ways you can do it: You can invest in CFDs, speculate the future value of gold, and make a profit if your assessments are accurate. Otherwise, you can buy shares of gold mining companies. The value of their shares is influenced by the price of gold, naturally. These are viable options for the small investor.
Wine: the entry threshold
It’s been about twenty or so years since the wine investment market first became popular. This trend is related to the establishment of the London International Vintners Exchange in 1999. Don’t be mistaken — entering the wine market is far from simple. I highly recommend that novice investors in this field do so with the aid of a specialist.
The entry threshold into the wine market is about several thousands of dollars or euros, as the price of a collector’s (or investor’s) bottle of wine starts at 500-$600. Storage is also a major issue: Storing wine is a pricey business. The investor needs to pay annual fees for safe storage facilities, not to mention the insurance costs. Don’t bother investing in wine without insurance. For these reasons, the wine market also is challenging for novices.
When you invest in ‘non-orthodox’ commodities, you should bring to mind that when entering new markets, you also let new variables in. Novice investors might not have the resources and time to manage the new factors that should be brought to mind. Also, in order to succeed, one needs the ability to look ahead to the long run, to make investing worthwhile. It’s not my intention to deter you from trying new fields of investments, though I do wish that you’ll be aware of all major aspects involved in entering these fields.