IT’S a golden rule that’s often worth repeating: there are no short cuts to investing success. If you cannot see where the risk is, it is often because you haven’t looked hard enough, it is always there.
But there are ways of reducing the risk. Alternative investment is popular because at the end of the day if the market collapses, one always has a tangible asset to fall back on. The case of Petrus can be drunk at a special occasion, the antique silver necklace can be worn and the stamp collection passed down to the next generation. But perhaps the real attraction of alternative investments - and the main reason why they work long-term - is that supply is restricted.
Wine is a case in point. Although it is produced all over the world, it is only the blue-chip wines that should be invested in. This means primarily top-flight red Bordeaux, Burgundies, wines from Italy and a few premium wines from Australia. Wine merchants typically recommend a minimum of at least 3,000, but the returns can be remarkable. According to Decanter Fine Wine Tracker, fine wine prices have risen eightfold since 1978, a compound return of 8.7 per cent a year.
Whisky is a more volatile market, but distilleries such as Ben Wyvis, Glen Albyn, Glen Flagler, Glen Mhor, Kinclaith and Millburn are highly collectable and, bought at the right time, can appreciate in value. With antiques it is a different story. The market is so diverse that generalising is impossible. But as rule of thumb there are higher returns in general from porcelain and lower returns from furniture. The first basic step is to visit a shop, antique centre or fair that has reputable and knowledgeable dealers. Most importantly it is crucial that what you buy is in the best possible condition, this is true of all alternative investments.
There are more than 30 million stamp collectors in the world, including the Queen and Real Madrid footballer Luis Figo. The typical timescale for stamp investment to pay off is said by dealers to be in the region of five to ten years. But according to the Stanley Gibbons SG100 index, between 1997 and mid-2003 the index appreciated 40 per cent. Unless you are already an expert philatelist it is wise to go to an expert such as Stanley Gibbons. It is also a good idea to get an expert to store them.
If the idea of being seen in your investment sounds appealing, then classic cars could be the hobby for you. Like all investments, classic cars have been prone to peaks and troughs - the latter being a rather sharp decline in the late 1980s. But prices are recovering and in the last few years have outperformed the stockmarkets.
As well as rarity and condition one can also add fashion and press comment. There are also mechanical and running costs, which can run into the thousands, but the returns can be excellent.