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Collecting wealth

Collecting wealth

Collectibles hold a place of pride in your house. Did you know they could fetch great returns too?

There is no alternative to money. An individual easily spends 60% of his lifetime trying to hoard it up and snatch those few hours of leisure to pursue interests that add meaning to life. But what if leisure hours also start earning you returns?

This is where alternative investments come in, that is investments other than the traditional fixed deposits, stocks, mutual funds, insurance, etc. From your grandfather’s stamp collection, the pouch of antique coins in the rusty trunk, that painting hanging on the wall to the old betel-nut cracker your mother still fondly uses—all are part of alternative asset category and can be money spinners.

Well, it probably will never be your mainstream income (unless you intend to deal in such products), but is definitely an attractive add-on option. Sceptics may say that only eccentric millionaires would be willing to part with hard-earned money for some stamp, autograph, coin or wine bottle. However, facts suggest otherwise. The emergence of a new moneyed class, shift in attitude from self-denial to indulgence and fulfilling aspirations combined with an awareness of history and art has laid the foundation of a market for alternative investments in India.

TIPS FOR BEGINNERS

Minimum investment: A surplus of Rs 2 lakh (after regular investments) is enough to get started.
Investor protection: Little or none — difficult and costly to confirm if the collectibles you bought are fairly priced and original.
Security: If collectible gets dam aged the value is gone or diminished.
Liquidity: Less than stocks, funds or bonds.
Returns: Rate of return is difficult to predict; don’t count on it for regular income.
Bottom line: Collect for your love of the collectible, or your interest in finding out about a subject. As your knowledge grows so will the quality of collection — and the rate of return.

Apart from the much-hyped art, coins, stamps and antiques are steadily gaining popularity as investment options. Globally, autographs, film memorabilia and even stringed instruments are giving good returns. The autograph of Paul McCartney, a living legend, has appreciated by 1020% in the last nine years. Though still to become big in India, the interest in such trivia and awareness about the possibility of monetary benefits is rising, especially among the younger generation.

Contrary to expectations, minimum ticket size for alternative investments does not require you to be rolling in wealth. A surplus (after investing well in equities and bonds) of Rs 2-10 lakh is enough to get started. Alternative investments serve to diversify financial portfolios, de-linking them from volatile markets.

Though meant to form only about 5% of your financial portfolio they can be most creatively satisfying of the lot. It is this feature of alternative investments that is fuelling its growth.

And for those who are not keen on picking up a Rs 50 lakh Husain but interested in raking in the returns, there is the option of art funds. The permissible overseas investment of $1,00,000 per annum can be used to benefit from the good run of alternative investments abroad. But cautions Rohit Sarin, wealth manager and founder-partner Client Associates, “Since there is a multiplicity of options available overseas, it will be difficult for an Indian investor to assess the inherent risks involved.” So, the bottom line is that before venturing into this sector abroad, do your homework to guard against frauds.

However, the market of alternative investments is unregulated and no one can definitely predict the rise or fall in prices. Something that commands a good price today might not tomorrow. Further, these investments are illiquid in nature and hence must be made with a longterm perspective. The significant appreciation in value also occurs only over a long period of time. So thorough research and may be even professional guidance are necessary to make a success of alternative investments.

But above all is a true interest in the field chosen. Monetary benefits should be only incidental to the pleasure of spending time with your favourite icon’s memorabilia (trivia), little antiques, or stamps. Read on to know how to go about a hobby that satiates both the mind and the matter.