The views of this article are the perspective of the author and may not be reflective of Confessions of the Professions.
Investing in Alternative Investments
Alternative investments are investment products that don’t include traditional investment like cash, stocks and bonds. The majority of these assets belong to accredited, high net worth individuals or institutional investors. Several of the most common strategies used when dealing with alternative investments can actually outperform the tactics used for profit in real estate, private equity, managed funds, limited partnerships and venture capital. Antiques, wines and art for example, are business ideas of great value, and they can be regarded as sound alternative investment options too.
There’s a correlation between alternative investments and traditional investments – an investor will have to apply some of tactics used in traditional investments and to diversify his portfolio and make a profit with alternative assets. Many people would go for alternative investments because they render returns without high risks.
Main Characteristics Of Alternative Investments
Even though they pose a lower risk compared to traditional investments, they often are unregulated. For a product to be of any value it has to be transparent and authentic. Sadly, scammers are everywhere and if you don’t pay close attention you could purchase an item that doesn’t have any kind of value. For example, you can’t buy a case of wine from a supplier that claims the product is a priceless vintage. Here are some other essential guidelines to consider:
- Don’t assume that transforming alternative assets into cash is easy
- One of the main benefits of alternative investments is the low correlation to other similar assets. For example, the value of your wine case won’t be affected in any way by stock market changes
- Certain types of alternative investment may be worth a fortune 30 years from now, or be worthless; only time will tell us if that Justin Bieber doll you bought will increase in value 30 years from now or not.
It’s difficult to say with certainly whether or not a type of alternative investment is profitable. History has shown us that lots of these assets outperformed stock market returns, although some have panned out too. Regardless, your best choice is to know as much as possible about the category you’re considering to invest in. The more you know the higher chances you have to make a profit.
Fine Wine – Profit Expectations
There are two methods of investing in fine wine: buying/reselling individual bottles/cases or buying shares in a wine investment fund. Premium wines have a vast history behind, and several types of vintages have become rare collectibles worth hundreds of thousands. The organized, formal sale/resale of wine for profit materialized in the late 70s and early 80s. In the US, a fine wine investment was considered an illegal activity. It was in the mid-80s when Illinois, and particularly California, started selling wine legally, but with no retail license. It was then when investors began learning the tricks of the trade. Some quickly realized that the laws were a lot more flexible in Europe, and so they relocated and turned their attention to the wine markets in France, which in times proved to be the most profitable.
A fine wine investment is not for everyone, and if you really want to make a profit, you have to know the market first. Many people make a good profit with wine; however, there are some very important considerations to abide by if you want that to happen to you too. First, you must be prepared to wait for about 5 years until the wines appreciates and increases in value. Second, you must have it stored in ideal conditions; and third, always be aware of the risks. Don’t forget that investing in wine is still an investment; and we all know that there’s no such thing as the 100% sure type of investment.
Alternative investments can be extremely profitable, whether we’re talking about wine, coins, antiques, and other collectible. Before spending any money, you should get to know more information about your preferred type of investment. When in doubt, consult with a broker and get professional advice. This is particularly important with fine wine; rather than take a risk and end up with plonk, it’s always a better idea to stay on the safe side and have some level of reassurance.
About the Author
By William Taylor and WineInvestment.com!