By Xavier Brenner Tis the season of scented candles and argyle socks and countless other unimaginative gifts. Let's face it, when time is short and the shopping list is long, it's all too easy to stick take the path of least resistance. The same holds true when it comes to choosing investments. There's nothing wrong with traditional investment vehicles (stocks, bonds and ETFs) when it comes to building your portfolio. Yet sometimes non-traditional investments are worth a look. Some asset classes like collectibles (wine, books, antiques, you name it) can fuel intellectual passions. Other investments may be more about giving than taking Here are 4 non-traditional asset classes that don't fit the cookie-cutter mold.
Rare booksIf you're someone with a literary bent, investing in rare first editions books can be intellectually rewarding and a good financial hedge against losses in other parts of your portfolio. First edition fiction works by well-known authors have appreciated 140% on average over the past decade, according to the British firm Paul Fraser Collectibles. Serious book collectors in search of bargains and new finds attend major book fairs and keep track of rare book auctions by Sotheby's and other houses. The best rare book advisers are in it for the love of the game. But the rewards can be sizable. In 2013, a first edition of Harry Potter and the Philosopher’s Stone, with annotations and drawings by author JK Rowling, sold for $235,000.
Whiskey It's the ultimate liquid asset. Believe it or not, the market for top single malts is a sophisticated one with indexes that track valuation trends. Over the last six years, top single malts have risen in value by more than 660% far higher than global stock markets over the same period. At an auction in Hong Kong back in January, a single bottle of Macallan “M” scotch sold for a record $628,205 at auction. The market is being driven by growing international demand for high-end spirits and a decreasing supply of rare and aged single malts, according to the experts.
Peer-to-peer lendingYou've probably never heard of lenders such as Zopa, RateSetter and Funding Circle. But they represent a new breed of online sites that match borrowers and lenders directly, usually via online auctions. To reduce risk, the loans issued often comprise many tiny slivers from different lenders. By eliminating banks out of the equation, lenders can get a higher interest rate from the borrowers depending on creditworthiness. Lending always involves risk, but the returns can be substantial is this era of near-zero interest rates on savings. According to the Economist, Zopa, a British P2P platform, offers 4.9% to lenders. That beats most bank accounts that pay zilch these days. On the flip side, it 5.6% on a personal loan, pretty close to what most banks offer.
Micro-loansIf you are more interested in social good than the profit motive, there are micro-finance sites like Kiva that allow you to lend money at no interest rate for a good cause. At Kiva, you can browse through hundreds of borrower stories of people looking for loans to grow businesses or go to school. The site works with NGOs around the world to find qualified buyers. Since its launch in 2005, Kiva has facilitated $550m in loans and helped a million people - many from the agriculture sector and three out of four of whom are women. The borrowers are vetted by the site, but you there's always the risk of a dud loan. If things go well, you will get back your principal on demand. You won't get rich investing in sites like Kiva, but you sure will feel like you made a difference in someone's life.
The upshot? The investor world is a varied one.With a little bit of imagination and determination, your next investment could be the start of a life-long passion or give you a different sense of satisfaction than a killer return. Continued learning: How to make the most of your charitable donations
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DISCLAIMER: The investments discussed are held in client accounts as of November 30, 2014. These investments may or may not be currently held in client accounts. The reader should not assume that any investments identified were or will be profitable or that any investment recommendations or investment decisions we make in the future will be profitable. Past performance is no guarantee of future results.
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