Many a times we read magazines or watch TV serials which showcase to us extra-ordinarily out of world ideas, may be related to travel destinations, cars, buildings etc which have amazing features which a normal person would not even think of desiring in present life. But still they fascinate us and obviously come at out of world price tag as well. We thought why not explore similar awe-inspiring ideas in the world of investment as well. Besides being sort of exotic, these are investment avenues which are not related to a certain growth rate, market conditions, liquidity scenarios etc etc most of which are understood only by a select breed of financial analysts (Surprisingly, authors of this article belong to that family!!) which make these ideas a true risk mitigating and diversification tool. So in case you belong to the Uber-rich variety take the plunge and for others, till you happen to become to that category keep noting down your options.
Till a few years ago, collecting vintage and classic cars and restoring them was a nascent business among enthusiasts with deep pockets who had a good understanding of car mechanics. However, it has become a serious business in the past few years.
Currently, there are just 5000 vintage cars up for grabs. But the demand is huge and hence the price of these cars is also quite high. Buying a vintage car will make you dearer by at least Rs. 5 crores and when it comes to the upper limit, well..lets not talk about it. However, such investments offer lucrative returns ranging from 12% to 25% within a span of 10 years. The sale of these national treasures is prohibited abroad by Indian law and that is what saves these from further declining in number. Owning a vintage car can be a matter of pride and hence cars such as those custom-made for Maharajas or used by the womenfolk of a royal household are worth a fortune. Such a rare classic promises to bring unimaginable returns and pride of ownership.
This might amuse many but for ones who can resist gulping it down, wine can become serious investment avenue. It is proving to be one of the most exotic alternative investments with returns at 10-50% a bottle. But the key to success is to stay invested for long. The investment horizon for wines to mature can be as high as 25 years. You can invest in wines in 3 ways:
- Buy bottles: This is the most traditional way to invest in wine. A thorough examination of the brand, vintage, longevity, history of the producer, consistency, score and storage conditions are essential to determine the quality of the wine. Moreover, it is advisable to store your wine in the country from where you have procured it rather than importing because import duty is much higher than the storage costs abroad.
- Wine funds: You can also invest in wine through specialty funds that buy wine. The funds will send you a share certificate with details of your investment, including a net asset value of the share. They will also give you regular updates on the value of your wine. The minimum lock-in period varies across funds. At the time of exit, you receive the net profit depending on the growth in the value of the wine.
- Wine futures: If you want to invest in wine even before it is bottled, opt for wine futures. These are also called wine primeurs. Investing in wine that has not been tasted is considered riskier than buying bottles or buying wine funds. However, if you are confident about the returns then there is no harm in it.
Another advantage of investing in wine is that it is not liable to capital gains tax (CGT), because of a tax regulation called the “Wasting asset rule”. This says that if an asset has a life of 50 years or more no CGT is payable on it. Hence, wine can be a very profitable investment option if done the right way.
Stamps and coins
Stamp and coin collection has been a hobby for many people for many years now. But now, it has emerged into an investment option. An attractive feature of collecting and investing in coins is that it is much cheaper and affordable as compared to other collectibles. Hence, it is not just for the High Net worth Individuals. Rare stamps offer a fine safe investment, where the investor’s capital is guaranteed, and is coupled with the potential for strong returns in the medium to long term. Stamps are a long term investment where you can expect returns in the range of 10-15 % over 5-10 years horizon. The record for the costliest Indian stamp stands at about Rs. 74,50,000 for a single example of the 1854 blue and pale red ‘Four Annas’ which was bought in October 2010. However, rare stamps are regularly sold for Rs. 50 lakhs and more. Rare coins can be as expensive as Rs 5 lakhs. One can expect a return of around 15% on rare coins. You can buy coins through online auctions as well as from rare coin dealers. However, one needs to do research regarding the rarity and desirability of the stamps and coins before investing.
Buying art as an investment is a relatively new phenomenon in the Indian market. Of late, people have started recognizing the fact that paintings are more than just a pretty wall adornment. If well-picked, they also have the potential to translate into decent sums of money. Consider this, a Pablo Picasso painting was sold for $106.5 million at Christie’s in New York, setting the world record for any work of art sold at an auction. This art fever is catching up in India as well with several HNIs willing to shell out huge sums of money to buy such extravagant pieces of art. And it’s worth investing as the returns from investing in artwork are very rewarding. But before that, one must see how much does one need to invest in order to get these high returns. If you are really serious about investing then you must have at least Rs. 1 crore with you and preferably much more. Because the more funds that you are willing to put in, the more returns you will get. Returns can range from 15% to 20%. During the time frame between 1995 and 2001, the annual appreciation in the value of investments in art was only around 5%. By 2006, it had picked up and there was great euphoria around investment in paintings.
You would be thinking that guitars are purchased only by guitarists. But that is not true. In fact, for some people, guitar is a form of art; wall art or as a free standing sculpture. But now, buying guitars, especially vintage guitars, has become a financial investment. Well-known brands such as Gibson and Fender can make great investments. A Vintage Guitar can start from anywhere around Rs 20000 and might end up into Rs 5 lakhs or even more. A vintage guitar could give you returns in the range of 10% to 50% depending on its make and its age. Generally, guitars made before World War II are the most sought after and hence provide the greatest returns. If you really want to invest in these, there are various exhibitions held in India which showcase these musical masterpieces. Apart from this, there are musical shops as well which sell vintage guitars such as Jhankar, a Kolkata based music shop which deals in vintage guitars. For guitar enthusiasts, this is a double treat because they are able to hold on to a musical instrument which they love and also earn income from it.
The memorabilia market is vast and is growing at a fast pace. Memorabilia could be anything, from Sachin Tendulkar’s cricket bat to Mahatma Gandhi’s spectacles. It could be anything that has some emotional values attached to it. The largest markets, however, are sports and entertainment, and the most popular trading is done through auction houses, specialty dealers, and internet auction sites like eBay. Make sure you invest in the big names in sports, entertainment or historical memorabilia as these will increase in value over time. A Madonna costume was once sold at an astounding Rs. 1.25 crores. A baseball bat was auctioned for an amazing Rs. 15 crores. Similarly, a Superman comic book was auctioned for Rs. 11 crores. When it comes to returns, you can easily earn in the range of 10% to 15% in a span of 10 years. I believe we all remember Vijay Mallaya’s pride in buying Tipu Sultan’s sword some years ago.
The main features to look out for our rarity, complexity and the condition which makes all the difference when looking for a luxury watch. But while there are major gains to be made, it takes a good eye to know the difference between a clever investment, and a waste of time. In such a vast and specialist industry where prices range from $1,500 into the millions, it’s difficult to know where to start. But as a prospective investor, you can head to an auction to find some of the most lucrative deals on luxury time pieces. While looking for rare watches, there are to brands which are considered to be meant for the ultra-rich, Rolex and Patek Philippe. An investor who purchased an 18 carat white gold Patek Philippe for $430,000 in 1995 can now sell it at its current market value which is a whopping $3.47 million. So the returns are very promising. And when you consider the fact that it is a recession proof investment, you have all the more reason to smile. The most important thing that one needs to keep in mind while investing in luxury watches is not the amount that you are going to invest, but the quality and brand of the watch.
Having read about all these, it should be well understood that most of the above do not have an organised market where you can buy and sell these at a market rate. You have to put in a good amount of efforts in finding the right buyer/ seller and the getting the right price. Another important key to investing in any of these is the time element. Most of these investments generally pass from generations to generations and keep appreciating in value over time.
So folks, now if you happen to win a lottery or hit a jackpot, you know how to utilise it.
Rohit Roy and Praveen Bajaj