Anything that you believe will increase in value can be used as an investment. In addition to conventional investments such as stocks, currencies or property, there are some new and alternative markets where you can try to make money.
Alternative markets range from relatively secure, slow growing assets such as wine to risky, but potentially highly profitable markets like modern art. Some of these markets have been around for as long as people have been exchanging goods, but others such as cryptocurrencies are brand new.
It is possible to focus solely on these alternative markets, but you can also to use them to diversify an investment portfolio based on more conventional assets. The trends in alternative markets are often independent from those in conventional ones as they are affected by very different factors, so they can help offset any losses. For example, your art collection might continue to grow in value even if there is a crisis in the stock market that is affecting your shares.
Cryptocurrencies or digital currencies function a lot like other currencies. You can buy items with them or be paid in them when you sell something. However, they are not tied to particular countries or managed by central banks. A cryptocurrency is actually more similar to stock than to conventional currency, at least when you are investing in it rather than spending it.
The best known digital currency is Bitcoin, but there are a variety of other currencies currently being used online. Confidence in these cryptocurrencies is rising, along with their use, which has drawn the interest of many investors.
Cryptocurrencies can be traded at exchanges, but unlike conventional exchanges there is no need to have a broker to make the deal for you. You simply need to set up an account and then buy or sell as you choose. You can buy Bitcoin or another digital currency using your traditional currency. You can also move money between digital currencies by buying one with another. If you want to turn your digital currency back into pounds or another conventional currency, you can do this at the exchange too.
When you own money in a digital currency, it can be kept in your trading account or transferred to a digital wallet. Various companies provide these wallets online, but you can also buy hardware wallets that enable you to store your cryptocurrency on a secure USB device. You simply plug this in to your computer and access the associated wallet online when you want to use your digital currency. Only someone who has access to the hardware will be able to get into your online account.
Once you have bought Bitcoin or other digital currencies, you will need to monitor the changes in its value on the exchange. If the value rises, you may want to sell your Bitcoin in order to make a profit. If the value falls, you will need to decide whether to cut your losses or wait it out.
Many factors can affect the value of your digital currency, including:
As the value of the digital currency changes, there are several strategies you can use to try to make a profit:
A real asset is something that has an intrinsic value. Unlike a financial asset such as stocks, real assets have a value that exists outside the market. The market itself will also be very different, usually with fewer trades being made and less regulation.
Depending on the kind of asset that you want to invest in, you might be able to buy it at a shop or antique market, directly from the artist or producer, through a gallery or dealer, or at an online or physical auction. It is even possible to pick up a valuable asset at a car boot sale, if you’re lucky. However, if you are investing a substantial sum in a painting or other asset, you will need to be very careful when you buy. You may need to have the authenticity and provenance checked to ensure you are getting the real thing from a legitimate seller.
You may also need to have the item valued or checked by an expert. It can require great familiarity with the market to be able to pick out a good investment. You need to know what makes that kind of asset valuable. You’ll also have to predict what people might place value on in the future, which can be much more difficult. Interest in artists or antiques from particular periods can change with fashions and the items that catch buyers’ eyes can often be unpredictable.
Although it is possible to invest in any asset that you believe will increase in value, common choices include:
Each of these assets requires a different investment strategy. The risks involved and the factors that will affect the asset’s value will be very different.
For example, gold tends to be a very safe investment as its value will usually increase or at least stay stable. Gold is also a simple choice because one ounce of gold is identical to any other. You can judge it’s value simply from the market price. However, if you are buying gold coins rather than just gold, there will be other factors you need to take into account. The age, design and history of the coin could also affect its value, potentially increasing it above the price of the gold it contains.
Many of the real assets you could invest in require the same kinds of judgements about their value. It helps if you are familiar with the market or you get an expert opinion. You can also look at recent and past sales prices for similar items, get an insurance quote or have the item valued. However, there are no guarantees when you are trying to predict the tastes of future buyers, especially if you intend to keep the asset for a long time before you sell.
In addition to the quality of the item you are buying, you may also need to consider how rare or common it will become in the future. Investing in a good vintage of wine can be very effective because it will become scarcer with time as people buy and drink it. Items that are produced in limited numbers or which aren’t being made any more will also tend to increase in value, as long as people are still interested in buying them, as the supply will shrink.
However, there is also a risk that your investment will deteriorate over time. A rare item can become more common if more are produced and buyers aren’t able to differentiate between the older and newer items. Some assets can depreciate due to wear and tear, especially if they aren’t being stored or preserved carefully. Items could also be lost, stolen or damaged.
It is possible to reduce the risk of loss or damage by looking after your real assets carefully. However, you may need to pay to have items stored in the right conditions or to be professionally cleaned or conserved. This will reduce your profits when you sell. You will also need to ensure your assets are insured in order to protect yourself against loss or damage. The biggest difference between real and financial assets is that you will have a physical item that needs to be protected.
If you have a substantial amount of money to invest, there are a few other alternatives that you might want to consider. However, these options are much less common and can be very risky.
