Exploring whisky, music rights and cannabis as alternative investments

Elke Brink, wealth advisor at PSG Wealth, discusses unconventional asset classes that could possibly form part of your portfolio if you’re already well-invested.

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When it comes to building a resilient investment portfolio, the most important aspects are to diversify sufficiently, and that means that the asset classes you are invested in are not correlated. Meaning – if one gets hurt, the other usually doesn’t – or even excels.

When speaking about alternative investing routes, it’s important to remember that this is not your conventional portfolio. Your main investment portfolio – focusing on retirement planning and emergency funds should still be invested in stocks, bonds, property and cash. It’s also imperative to always consider what your opportunity cost is.

A successful investment portfolio is about time in the market.

Therefore, if you for example invest in a vintage wine or a classic car for many years, what would that same investment in the stock market have been worth had you only invested in it?

But if you have some excess funds lying around, you can certainty have some fun with a few interesting assets, especially if this is a collectable you feel passionate about – of which some have proven excellent returns. But it’s important to remember that these types of “investments” – should it be whiskey, wine or cars, are in many cases just driven by supply and demand – and can essentially be seen as speculation.

Alternative investing dates back much further than we realise! Way back, people used to pay for medieval manuscripts or Italian marble statues – which are worth nothing today.

South Africa even had its own recent “fashion” when game breeders decided to manipulate their own asset class of some sort by genetically manipulating the colour of animals – and selling it for much, much more.

Black springboks and golden wildebeest were “born” – but safe to say, this bubble popped very quickly and very hard.

It was just driven on supply and demand – until everyone realised, maybe this was a bad idea.

Art and jewellery also form part of the typical luxury goods alternative investments people love to buy.

Speaking about jewellery (yes, diamonds are still a girl’s best friend – so if not buying it for an investment, gifts are acceptable) – gold and diamonds are also defined by their quality. Ensuring you are buying the right thing is essential when it comes to any of this. That is where the main risk lies – pricing and valuation – with gold it’s easier as bullion has a standardised value, whereas diamonds are not as transparent. My opinion when it comes to an investment perspective here – rather stick to the stock market.

Art is a whole topic in itself – and a fascinating one. It is well understood why many investors tend to enjoy investing in collectables and art, as this is perhaps not only a passion, but it’s also a tangible asset – compared to investing in the stock market or a bond.

Again, a few aspects need to be considered – what exactly are you buying, and is it fairly priced? Over a period of 20/30 years – what fees would have been payable – for example auction fees, safekeeping etc? And how would that period and fees have compared with investing in the stock market?

Lastly, when it comes to any form of collectable investing – like art, jewellery, stamps or even cars – keep in mind your liquidity has no guarantee. So don’t count your chickens too early …

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Invest in the growth of party time. People got nothing better to do with their oodles of spare cash. They all never had it so good.

More zol, less bother… 🙂

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