By Trevor Keidan
PHNOM PENH - "Don't mix business with pleasure" is a common refrain but one that does not always apply, and this is especially true when it comes to investing. After all, there are those who do manage to mix business with pleasure and turn their passion into profit.
These "hobby investors", as I like to call them, can sometimes have the best of both worlds. They often deal in art, classic cars and fine wine, and spend their time searching, researching and collecting.
Sometimes their passion - and hard work - can reap rewards. Sometimes it doesn't. However, the risks associated with such investments are often high and the expertise required is often considerable.
Let's take art for example. We all dream of stumbling across a painting by an undiscovered artist and picking it up for next to nothing, only to find that it is some long lost masterpiece that is in huge demand and worth millions. Although this has actually happened, such a scenario is rare.
To turn a profit on art, one has to have a certain amount of expertise or access to expertise (through a dealer). Such expertise is often built up over many years. One needs to know all aspects of art, from artists to styles to genres and movements. It is a specialised field.
As an investor, if you are serious about investing in art, you would be well advised to take on the services of an expert to help you determine authenticity and value. And even though you would probably be paying a commission, you would probably stand a better chance of making a return. (However, having said this, Phnom Penh does seem to have an emerging art scene, so you might just discover the works of a budding local Picasso - even without the help of a dealer or expert).
Collecting classic cars has always been a great way to make money and has always been especially popular with men! However, to be successful it does pay to know something about the subject before rushing out to buy.
To begin with, it is not just the age that makes a car a classic. There are other factors involved, such as availability and desirability (supply and demand) of the make and model. Real collector cars can fetch tens of thousands of dollars when they are in good condition and are in demand.
And you can even own a future classic now. One of the world's most respected car collectors, Hagerty Insurance Agency CEO McKeel Hagerty, has come out with his own list of cars that he claims will become collector items. Hagerty's list includes the following models: Cadillac XLR-V Roadster, Lotus Exige S, Audi S5, Mustang Shelby GT 500 KR, Chevrolet Corvette Z06, Smart, Subaru Impreza WRX STi, Honda S2000 CR, Pontiac Solstice/Saturn Sky and Dodge Charger Super Bee. So if you are driving around in any of the aforementioned models, you might want to hang on to them. They could be worth a fortune in years to come.
Wine is another fun collectible that can earn returns of up to 100 percent on its original investment. Fine wines generally mature and improve with age. And as the supply of a wine drops, the value of the vintage increases in line with the demand.
Once again, if you choose to go into this type of alternative investment, then you need to know what you are doing. Investing in wine does have its risks. Like stocks, prices can go down as well as up, and if you don't sell wine at the right time, it could lose its value.
For those who are interested in investing in wine, but lack the expertise, there are dedicated funds such as the Vintage Wine Fund or the Wine Investment Fund. Both have achieved at least double-digit growth over the past five years.
So, if you are looking for a little investment fun or something to further diversify your investment portfolio, there are other options aside from stocks, bonds and funds. This column has mentioned but a few.
I recommend those who are interested in alternative investments to seek out the appropriate expertise for the investments they are interested in. In addition, even though alternative investments can be fun, they can fluctuate in value just like traditional investments.
Also, as a personal finance professional I strongly recommend that investors do NOT make alternative investments the backbone of their investment strategy.
Instead, I would recommend those who are interested to use such alternative investments as a supplement to a carefully considered financial plan that helps investors reach their investment objectives.
After all, Your Money Matters!
Trevor Keidan is managing director of Infinity Financial Solutions.
Infinity Financial Solutions provides impartial, tailor-made
personal financial advice to clients in Cambodia and
Southeast Asia. Should you wish to contact Trevor,
please send an email to [email protected].
Trevor welcomes comments and questions about his
articles or any other financial matters.