Belfast Telegraph

Friday 18 April 2014

Going for gold, horses for courses

As the investment world continues to reel from the body blow of the credit crisis and with investors bruised by every sort of asset type, you could be forgiven for thinking that the diversified portfolios, which were lowly correlated but which still were hit, have been something of an illusion due to the fact that they have not entirely softened the downturn.

That said, I am not for one moment suggesting that a properly correlated portfolio is wrong. But, in a bid to raise the mood as we approach Christmas, I thought a look at some alternatives might be illuminating.

Let’s start with gold. Whenever the credit crunch first became apparent, there was a stampede to buy gold, which subsequently hit a huge high in March this year, but has since fallen back as the dollar has come back in value.

But if you look at the longer picture — say the last 10 years — gold has risen 149%, which, being nearly five times inflation, is maybe not such a peripheral asset consideration after all.

The next area is fine wines. Believe it or not, wine has become a real investment class with its own index — the Liv-ex 100 Fine Wine Index.

In days gone by it was the done thing for a young man, whenever he reached the age of 21, to be bought a ‘pipe of port’ by his parents — and this was laid down on the simple principle that something of good quality will always be worth something.

Nowadays, however, there are a number of wine funds to invest in that are run by experts in this field, thus saving you the worry about what to buy if you don’t feel knowledgeable on the subject.

And what about our four legged friends?

We have all had a day out at the races at one time or another and probably lost the house keeping money as a result.

And I will remind investors of the old adage that to make a small fortune from owning a racehorse, you need to start with a large one. There are two basic opportunities — either join a racing syndicate or go into breeding.

The one problem with horses is that the running costs are high and you do need to be able to stand the loss if your nag does not win.

But, there’s always the breeding angle and there is an Enterprise Investment scheme available to investors so that you can enjoy some tax breaks.

But if horses don’t interest you then you could consider going to the dogs. Greyhounds have been raced for centuries and you can pick up an un-raced puppy for as little as £350 upwards.

Obviously the running costs are lower, too.

Then there are what could loosely be called “collectibles” and these include stamps, antiques, classic cars, old books etc.

But again, regardless of whatever you think might suit your pocket or portfolio, the basic principles of investing still apply.

And there are possibly one or two additional rules to take into consideration with “collectibles.” In the first place remember that just because you don’t like or appreciate something, this does not mean it will be a bad investment.

Remember that it is other people’s preferences that you will be selling to.

The converse is also true. It can be a mistake to let your emotions take over as this may cloud your judgement.

Remember too that you will need to take five-year view on any such asset as a minimum.

And finally, as with any investment, your research will need to be comprehensive.

Nicholas Watts is an independent financial adviser with Positive Solutions Financial Services which is regulated by the Financial Services Authority. To contact him, use the website www.realwealthmanagers.co.uk.