The moves of financial markets in the 2008 downturn taught a valuable lesson to common people the so called “retail investors”, to have a diversified portfolio i.e. not to put all your eggs in one basket to avoid loss of their hard earned money.
This diversification opened up various options for investors and they were surrounded by various strategies of diversifying the portfolio from just equities and stocks to bonds, commodities currencies and to smaller risk takers took the option of Mutual funds and fixed deposits.
It had been 5 years since that downturn, the collapse of the Mighty Lehman yet fresh in front of our eyes and our very dear Sensex taking a nose dive from and height of 21k’s to 8k levels. The never diversification options that had emerged up then have in past quarter have started showing their effects. The dollar which has been since years in the range of Rs 50-55 went down like nine pins to levels of Rs 68 in a short period of time. All efforts of RBI and the “Rajan Effect” have been a healer in past one month but yet the wounds are bleeding. The NSEL outburst has also scared the investor who anyways found dealing with commodities difficult. With almost everything be it equities, currencies, commodities betraying the investor, the common man is in two minds where does it look for its long term investment that would earn him money.
Although the above mentioned investment products would continue to be investor favourites as the tide changes from red to green ,a little research over the internet makes us gauge that the next line of investment theories of diversification could come from exotic investments.
Although yet untouched by the retail investors in India, these exotic investment choices are catching trend amongst the investors in the western countries and among the HNI class in India. These investment options bear a high risk currently as the correct knowledge and information regarding the same is very minimal and these options are highly illiquid because of unavailability of an organised markets and volumes of trade. With increasing awareness, research, understanding, favourable policies and availability of products and resources over the internet we anticipate these investment could be the next big thing once the retail investors starts investing in it. Although these investments range from anything from exotic jewels to horses, we have picked up three exotic investments which are racing ahead of others.
Wines
Wine, today is no more the same where people purchased it to enhance their dinner platters, but today has picked up as an investment product which can easily fetch you a return of around 15% a year . This changing outlook for wines has seen a surge of demand in global investors. Fine wine investments are not regulated by any authority.
It is a tangible asset and as such investors have the freedom to profit from investment without any sort of authorization. Although the minimum investment required for such investments could be Rs 5-10 lakhs as investments are basically made in euros and returns generated has tax implication as per Indian law.
Some precedents have shown that speculation in wines have also yielded returns of 100 to 200 percent . The basics of wine investing lie under the rule that fine wine investments is limited supply and increasing global demand.
The Liv-ex , a benchmark index based on sales prices of the most sought-after 100 wines – has outperformed global stock market indices and some stocks of wine have also give a better return than that of gold. Again a word of caution that every expensive fine wine will necessarily increase in value and investors need advice from expert wine brokers
Rare Coins and Currencies
To believe the various secondary sources Coin collecting is a $10 Billion dollar a year industry in the United States alone, and the world wide figure is somewhere around $100 Billion dollars a year. Since these are rare items and can’t be reproduced, the value will only increase with the rise in demand.
An investment in a single rare coin is better as chances of appreciation in its value are much higher, but you will need to make a sizeable investment to buy one. A lot of knowledge is required for not only in collection of coin but also in preservation of them as even a slightest mistake even in preserving the same could lead to significant loses. Consultations to catalogues like the Standard Catalogue of World Coins could be helpful in getting an idea of the price of a coin.
The basics of coin invest lie in following standard rules i) The price of a coin typically would depend on its rarity, condition and series and are chiefly governed by demand and supply ii) Coins with low mintage numbers are always be costlier majorly weightage is given to the quality or grade of the coins. Investing in coins will have its own risks. So, consider taking some help from experts. Some auction houses and coin dealers can also provide valuation of the coins for a small fee.
Art
Investing in art becomes a slightly difficult and tricky than the other categories, because no formal market for it exists. There’s no guarantee that a painting which is bought today will interest anyone else enough to purchase it in future. So utmost care needs to be taken before you put your money into any art work.
Have research and consultation in place when any artwork is chosen so that the confidence remains intact that whatever is bought has a good chance to increase in value over the years. Also one should remember not to make a mistake of considering art as a short term investment because commissions to buy or sell art through a dealer or at an auction can run up to 20 percent.
As far as research is considered, for investing in art once can find catalogs, sales prices and all kinds of other information on the Internet. Local art consultants and enthusiast can be a good source of primary information. Also if a trusted relationship can be developed with a dealer locally, it could be a huge source of valuable information.
With growing demand of diversification, new horizons such as the above mentioned are coming up and have potential to be the next big play in the investment market. Although the risk of them is higher and investment horizon longer, the scenario for the same could soon change as retail investment in them picks up helping in forming a proper market place for the same
Nilesh Maurya with an MBA in Finance from Amity University has diversified experience in Accounting, Taxation, Corporate Finance, Investment, and Competitor Intelligence. ...
