Small investors are often given the same cookie-cutter advice: stash your savings in fixed deposit, bonds, unit trust, stocks…which are all perfectly reasonable and proven ways to grow your finances, but sometimes it pays to go against convention and let your creativity run free.
People have multiplied their fortunes by putting their money in unorthodox investments. While these strategies may not be risk-averse, they offer a fresh perspective and open up new and exciting avenues to make your money work harder for you.
Here are seven alternative investments you might not have considered, but could rake in sizable returns in the long run.
1. Designer bags
That trendy knockoff may look good with your outfit, but designer handbags that appreciate in value are what you should be looking for if you want to grow your money.
Like luxury watches, designer bags are more than just a fashion statement. That classic bag you buy today might become a rare, discontinued item in 10 or 20 years. Many of these timeless and enduring pieces are a worthy investment that can yield consistent and generous long-term returns.
There are certain bags and designs that will stand the test of time. One fine example is the classic Chanel flap bag. On average, the French brand increases its prices from 8% to 12% per annum, which means a Chanel bag you buy today could potentially increase by over 30% in value in three to four years. This is provided that you maintain the bag in good condition.
In 2010, the classic flap bag cost US$2,650 (RM11,041 at the time of writing), and it increased to US$4,900 (RM20,416 at the time of writing) in 2012. That’s 84.9% increase! Even if you sell it preloved, you can sell well above your purchase price, while pocketing some profit.
However, you will require a substantial amount of funds to afford one of these bags. Today, the same classic design will cost you RM22,850, while its larger and smaller variations go for RM25,470 and RM20,230 respectively.
The luxurious but notoriously expensive line of Birkin bags by Hermès is another designer mainstay with a proven history of appreciating price value. Seen as a symbol of wealth due to its high price, exclusivity and highly-publicised usage by celebrities, a Birkin bag can cost you upwards of RM38,748. Those made with exotic leather can reach six-figure prices.
Popular favourites, such as the Louis Vuitton Speedy bags, can also retain their value and are recession-proof. Prices for the Speedy line range from RM4,600 to RM15,300.
Those who are hoping to purchase designer pieces for investment should look out for timeless styles in neutral colours like black, blue and white and material like leather, as they will never go out of fashion. Meanwhile, seasonal multi-coloured and fabric versions may not be the best designer bag investment choices.
2. Wine
Investing in wine is nothing new. The formal and organised transaction of fine wines began in the early 1970s and early 1980s, and peaked in the mid-1990s, where buyers often purchased premium wine to be sold later at a higher price.
The prices of the world’s top 1,000 wines rose by 264% over the past 15 years. This beats the S&P 500, which only rose 144% in the same period.
About 90% of the world’s investment grade wine comes from the Bordeaux region of France. A bottle of Château Lafite Rothschild from Bordeaux, one of the world’s most expensive wines, can cost around RM3,000. Older bottles command prices close to RM10,000.
While some of these iconic wines have proven to be sound and low-risk investments, it is important to remember that wine prices are not immune to economic setbacks. For example, the global financial crisis impacted wine prices in 2008 and in 2011. However, the wine market has since recovered and has remained relatively stable since 2013.
One drawback to wine investment is that wine is vulnerable to weather conditions, so proper storage is very important, especially in hot and humid Malaysia. Wine cellars can range between RM800 and RM14,000. Because stored wines do not generate return for the investor until it is sold, additional storage costs also mean the investor is losing money while waiting for the wine’s value to appreciate.
3. Art
Art can be much more than decoration, it can be an investment. The Artprice 100 index – a benchmark that focuses on “blue-chip” artists – has an annual average return of 8.9% over the past 18 years.
The common misconception for new collectors is that they can’t enter the art market without breaking the bank. After all, the record-setting sale of Edvard Munch’s The Scream, which went for a mind-blowing blowing US$119.9 mil (approximately RM400 mil) in a 2012 auction, is enough to shatter your art-owning aspirations.
The good news is, average Joes can still stake their claim to art without losing an arm and a leg. Through art funds, novice investors can purchase art with limited resources and without having to worry about issues that accompany owning fine and expensive pieces, such as insurance and upkeep.
Art funds work like private investment funds. Investors, usually with the help of an advisor, pump in money, and a professional team acquires investment-grade art. Some art funds try to get their pieces displayed in museums to boost their provenance and enhance their value. They then try to sell them for a profit, generally between five to eight years.
Some funds focus on a single medium while others, like the well-known Fine Art Funds in London, diversify their investments.
However, investors should take note that not all funds are well managed and cases of art fund scams are rife due to the lack of proper regulation across the board.
Art funds are also scarce in this part of the world, so local art investors will have to do some extensive research and scout for options abroad.
New investors should also consider buying works from emerging artists, which are considerably more affordable and has the potential to grow in value when the artist becomes more established.
You can purchase art through local merchants Wei-Ling Gallery, located in Kuala Lumpur.
4. Musical instruments
Musical instruments have to be one of the most underrated alternative investment choices, with fine violins being the top of the money-making list.
Though they come with a hefty price tag – with many from the top-end varieties breaching the seven-figure margin – statistics show that violins have performed better than many other investments, including stocks. According to data from Rare Violins of New York, violins by the Italian Stradivari family has an investment return of about 14% per annum.
In 2006, Forbes listed the most expensive instruments in the world and Stradivarius violins held four of the top five spots. These magnificent gems were created from 1700 to 1720 by Antonio Stradivari, who was considered the most significant and greatest artisan of his time.
With only 650 in existence today, these immaculate art pieces are prized as much for their supreme craftsmanship as they are for their rarity and uniqueness. They are estimated to bid at the starting auction price of millions of dollars.
Other instruments you can consider putting your money on include musical instruments that were owned or have been played by celebrities.
Actor Richard Gere’s collection of guitar went up for auction in 2011 and fetched around US$936,000 (RM3.9 mil).The best guitar among the lot was a 960 Gibson Les Paul that exceeded the estimated cost US$90,000 (RM376,020) and was sold at US$98,500 (RM411,533).
Factors to consider when purchasing instruments for investment include who made it, who played it and its condition, and you could be on your way to singing a sweet financial tune.
5. Dolls
Few would imagine that a childhood hobby could actually help you score some pretty big bucks. Though in most cases, making a profit from the world of doll-collecting requires exponential amounts of research and patience, and is highly-dependent on luck.
Given the perseverance and good financial fortune, the payoff can be magnificent. In 2004, the first-ever Barbie doll, which debuted at the American International Toy Fair in 1959, fetched a cool US$27,000 (RM112,806) at an auction. The original doll had cost only US$3 (RM12.53)!
Elsewhere in 2006, Barbie in Midnight Red, dating from 1965, sold for a record £9,000 (RM46,757) at a London auction.
More recently, the 2011 Tokidoki Barbie (which sports a pink bob hairdo, tattoos and a cactus friend, Bastardino) retailed at US$50 (RM208) at the time of release. Today it is listed on Amazon.com at US$900 (RM3,760).
Typically, the money to be made collecting dolls revolve around those that are vintage, antique and typically still in the box with all their accessories, including the stand. The kind of appreciation in value as evidenced by the Tokidoki Barbie is somewhat rare.
As a whole, doll investment can be tricky business with varying and unstable returns. For instance, Barbie dolls typically drop in value shortly after they are released, so it is definitely not an ideal platform for short-term investments.
Don’t buy Barbie dolls for investment unless you are willing to store them up for at least 20 years, where dolls typically start to go up in value. Perhaps, it can be a good investment to start for your kids.
We also recommend staying away from creepy-looking Raggedy Ann dolls (especially ones named Annabelle)…just in case.
6. Lego
Here’s another childhood fixture that could make rake in huge returns. Lego did better than gold, stocks and bonds between 1987 and 2015, yielding an average return of 11% a year.
The most valuable Lego sets are those that tie into popular culture. The 2007 Millennium Falcon kit, for example, retailed at US$499.99 (RM2,094). In, 2016 it was selling for nearly US$4,000 (RM16,752).
As such, if you’re thinking about putting your money in Lego, sets that are based on famous films or franchises could make good investment choices. Additionally, go for sets that are retiring soon or have a limited production run. These are more likely to spike in value when demand exceeds supply.
Your Lego sets are more likely to increase in value if you can resist playing with them. Even though used sets can still produce enviable returns, you’ll get the best prices if you keep them in an unopened, pristine condition.
Of course, a risk you’ll be taking on with Lego investing is that unlike watches or wines or dolls, you’re not betting on continued interest in an industry – you’re betting on continued interest in single brand. However, there’s a huge community of Lego enthusiasts, which could mean that the hype around Lego is unlikely to die out anytime soon.
7. Watches
Luxury timepieces can command huge prices.
In 2017, the Rolex Daytona Paul Newman (owned by actor Paul Newman himself) fetched a record-breaking US$17.75 million (RM74.36 million) at an auction. Other vintage models similar in appearance have also earned the nickname “Paul Newman Daytona”, and are traded hundreds of times their original prices.
Of course, watches that have skyrocketed in value thanks to celebrity status are rare. Nonetheless, watches as an asset class have produced a 69% return over the past ten years (as of 2018), according to real estate consultancy Knight Frank. They’re a surprisingly non-volatile investment asset, beating even gold for price volatility in the past decade.
If you’re looking out for a watch that could increase in value over time, consider these factors:
- Brand. Watches made by popular brands like Rolex, Patek Philippe and Omega are more likely to be sought after.
- Exclusivity. Look for a watch with limited production. The lower the supply, the higher the demand – and the more valuable the watch will likely be.
- Association. Watches associated with a celebrity (like Paul Newman) or a story (like the Omega Speedmaster Moonwatch, which has been worn on all six moon landings) are more likely to be of interest to buyers.
- Design. Watches with complicated movements tend to be more sought after. Those with unique designs or shapes also are more likely to be valuable.
In Malaysia, you’ll find lots of retailers selling luxury watches, so make sure to compare prices before you make the purchase. You can also get second hand watches on sites like Chrono24 or StockX. Alternatively, hit up your neighbourhood pawn shop or antique shop – although you’ll need a good eye for spotting a fake.
Do these alternate investments have a place in your portfolio?
If you have a particular interest in any of the items listed above, and can comfortably afford the upfront costs involved, these alternate investments could pay off in the long run.
But not everyone can afford to put down thousands of dollars on something that may or may not increase in value. If you find yourself in this bucket, consider more conventional ways of growing your wealth. This could include putting your money in a fixed deposit account, investing in stocks or investing via a robo-advisor.
This article was first published in November 2014 and has been updated for freshness, accuracy and comprehensiveness.
