Enjoy your hobby, but don't give up the day job
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Staff Writer
Ruth Jackson Nov 14, 2008
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No two Penny Blacks are the same, which increases their value
As stockmarkets plunge and property prices crash, some people are turning to alternative investments to make their fortune – or at least preserve their wealth. But can you really fund your retirement with stamps, books and wine? For the vast majority, the answer is no. People often underestimate the correlation between alternative investments and the stockmarket. "Buyers of alternative investments, especially those at the top-end, are more often than not spending City bonuses," says David Prosser in The Independent. As a result, relevant indices show that most alternative investments are starting to slump along with other asset classes.
These days, alternative investments are once again being revealed for what they always were: potentially rewarding hobbies more likely to keep you busy than make you rich. The good news is that with prices falling, starting a new collection is likely to get cheaper over the coming years. So if you're looking for a new hobby, where should you begin?
Wine
News that the prices of top label wines have fallen by 10%-20% at auctions in New York and London in the past few weeks shows just what a risky investment wine can be. The bottom has fallen out of the market as the bids dry up and the rich – even the wealthy Russians and Chinese who were hyped as the buyers of last resort for all manner of luxury goods – close their wallets as they face financial uncertainty.
So the days of laying down a wine and watching the price tick up are over. But there's no need to give up drink altogether. Pick a good wine and store it for ten years and even if it hasn't gone up in value then you can at least enjoy a pleasant drink. If you want to begin your own wine collection, "stick to Bordeaux, the top 20-30 chateaux and the best vintages at current prices", Joss Fowler of Berry Bros & Rudd tells The Sunday Times. And remember – the key to wine holding its value is storage. So be prepared either to spend a fortune on an in-house storage system, or store your wine via your broker or wine merchant.
Don't forget that, as with most other alternative asset classes, the wine industry is "awash with rogue traders", says Jo Thornhill in the Mail on Sunday. And there is no financial regulator to turn to. So check Investdrinks.org for the latest list of frauds and black-listed wine investment companies.
Stamps
Around £5bn-worth of stamps are traded every year. Some "top-end stamps have the sort of investment track record most City fund managers would die for", says John Greenwood in The Daily Telegraph. The GB Rarities index, a basket of 30 of the world's most sought-after stamps, has risen every year for the past 50 years, and averaged a 10% return a year.
It's hard to believe that these sorts of returns will continue as other asset prices collapse. But it does show the importance of being picky about what you buy. As with wine, be wary of fraudsters cashing in on the recent boom. During a previous boom in the 1970s ,"a lot of lower-quality stamps were mis-sold by unscrupulous dealers and their value subsequently collapsed," says Stanley Gibbons' CEO Mike Hall.
Stick to old stamps, says Christopher Howse in The Daily Telegraph. Penny Blacks are so valuable because no two are the same, thanks to irregular engraved plates and the fact that early stamp sheets were unperforated and cut with scissors. Also consider the aesthetic appeal of the stamp. "As with other alternative investments... collectors with taste make the best investors," says Howse. So as with art, buy stamps for love rather than money and you may be pleasantly surprised on the latter.
Books
The success of the Harry Potter franchise didn't just encourage children to read, it also rejuvenated the book-collecting market, with people eager to buy first editions of the books. The first run of Harry Potter and the Philosopher's Stone
comprised just 500 copies, with 300 going to school libraries. Its "sheer rarity" means it can fetch up to £6,000 at auction, says Emma Wall in The Sunday Telegraph. With print runs for later editions running into the millions, a first edition alone isn't a great buy – but an author's signature can make all the difference. "JK Rowling signed only 1,700 copies of The Deathly Hallows. First editions of this are worth only the cover price, but with a signature they go for upwards of £1,000," Robert Harkins of Anderida Books tells The Sunday Times. But don't assume a signature necessarily adds to the value of a book. Some authors sign so many copies that they offer little value, as is the case with Jeffrey Archer.
Also look out for dust jackets, which can make all the difference. Graham Greene's Brighton Rock can fetch £200-£300 at auction without its jacket, but add the wrapper and it can sell for over £30,000. And if you are looking for the ultimate collector's book, keep your eyes peeled for copies of Ulysses by James Joyce published in 1922, says Conal Gregory in The Sunday Times. It was published in various limited editions with the rarest being 100 copies signed by Joyce and printed on special paper. These have been known to fetch over £150,000 at auction.
So the key to book collecting is to hunt for first editions of first books by now famous authors, complete with dust jackets. And "remember, with books it's 'condition, condition, condition'", says Eamonn De Burca of De Burca Rare Books in The Sunday Times.
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