Alternative investment options Investment advice

When you think about alternative investments, you may imagine art or antiques, but have you considered putting savings into fashion, fine wine or even a film?

Alternative investments - income and risk

While some options could give you cash back while you hold them – like investing in a racehorse – most don't generate regular income and should be viewed as medium-term or long-term investments. For certain others, the only financial benefit may be in the form of tax breaks.

Any alternative investment can be risky. Even established options – such as buying art – may never show a profit. You could strike it lucky and discover a masterpiece you're prepared to cash in, but it might be best to keep the painting on your wall and love it yourself.

Naturally, choosing an area of interest will make you a more informed investor, but you should still research the market by trawling the internet, speaking to dealers, reading books on the subject and watching auction sales.

Auctions can be exciting and you can get real bargains, but inspect the item beforehand – or get a condition report from the auctioneer – and do your own research on the likely value of the piece.

When buying at auction, you should set yourself cash limits. Most auctioneers will charge commission – from around 15%, plus VAT, of the purchase price – so plan for fees and commission in your calculations.

If there’s a particular item you’re interested in, books such as Miller’s range of buying guides give a good idea of price. For expert advice, speak to a selection of dealers and auctioneers. They may know where to source particular pieces and can keep their eyes open for you.

The Antique Collectors’ Club publishes a book with details of around 4,000 dealers and auctioneers throughout the UK. Choose a member of a recognised trade body such as the British Antique Dealers’ Association or LAPADA (the Association of Art Antiques Dealers).

Credit cards offer protection

Be aware that alternative investments aren't regulated by the Financial Services Authority or covered by the Financial Ombudsman Service.

For more protection, pay for items costing between £100 and £30,000 with your credit card. This means that if things go wrong, you may be able to claim against your credit card company under the Consumer Credit Act.

If the dealer has described an item in a particular way – e.g. the age, style, provenance or condition – make sure this detail is on the invoice and keep the catalogue of investments bought at auction.

If you sell certain items and make a profit after deducting expenses such as auction fees, you may be liable for capital gains tax (CGT). But you pay only if your yearly net gains reach £10,600 or more, which is the CGT annual exempt amount for 2012-13.

Also, individual items, or a set of items such as matching vases, worth £6,000 or less, are exempt. See our guide to asset tax for more information.

Scams

The old adage 'if it seems too good to be true, it probably is' applies particularly to alternative investments.

One reader contacted us with details of a horse-racing syndicate scam. In return for an investment of £1,000, he was ‘guaranteed’ 120 winners and was ‘assured of making at least £250,000’.

If you take professional advice and buy from reputable sellers, you can help avoid being stung by a con like this or others.

More on this...

• To talk about what alternative investment option is best for you, call our experts on the Money Helpline
• If you're concerned about tax on your savings and investments, read our expert guide
• For other investment ideas, take a look at our guide to different types of investment