You may be tiring of news of the endless fluctuations of share prices and longing for other options even if these involve a higher degree of risk. Here are some alternatives that provide either reassurance or a dash of fun.
Property
In uncertain times, people will turn to the reassurance of property. Residential property prices are robust, according to Savills, which forecasts growth at 5 per cent for next year and 19 per cent by 2020. The Centre for Economics and Business Research says that a “chronic lack” of properties for sale is one of the main reasons behind the upward revision to its forecast for this year. It predicts an average increase of 4.7 per cent; its previous forecast was 1.5 per cent.
UK commercial property is also performing well, and its yields are higher than those on gilts and bonds. But Ben Willis, of Whitechurch Securities, warns: “While property is a tangible asset, it is illiquid and not readily realisable.”
How to invest
For most people who own a home, the way to increase their exposure to property is to enter the growing buy-to-let business. Savills is predicting that the number of private renters will rise from 4.86 million to 6.04 million in 2019.
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Yields range from 3.7 per cent (in the southwest) to 6.4 per cent (Yorkshire and the Humber), according to the latest index from Your Move and Reeds Rains, the lettings agents, but these are reduced by repairs and void periods.
You need to buy a property that satisfies tenants’ requirements: close to transport and other amenities.
A cost-effective and liquid way of gaining exposure to commercial property is via a fund such as the Aberdeen Property Share Fund and the Fidelity Global Property Fund.
Gold
Gold prices have been falling for most of the year, but they recovered slightly as concerns over the Chinese stock market grew. However, the rebound seems to have been short-lived, with expectations of a US interest rate rise pushed further out. Maike Currie, of Fidelity Personal Investing, says: “People buy gold when they’re worried about inflation. As gold is a finite asset, it will maintain its real purchasing power when prices are spiralling out of control. But with falling energy and food prices, inflation is pretty much non-existent.
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“The other key driver of the gold price is the US dollar. As gold is priced in dollars, it tends to fall in value if the dollar rises. With the dollar surging, gold looks to have lost its lustre. With investors hungry for income in a low-return world, the cost of holding an asset which pays no income seems to be too high.” Some analysts expect gold to fall below $1,000 an ounce.
How to invest
There are many investment funds that offer exposure to gold. Among the best known is BlackRock Gold & General, which is down 60 per cent over three years but up 0.5 per cent over the past month. Alternatively, the Royal Mint is starting to sell slices of gold bars from only £20, making the precious metal available to all. Its Signature Gold service allows you to purchase a fractional amount of a 400oz gold bar that is stored by the Royal Mint at an annual cost of 0.5 per cent plus VAT.
Fine wines
Buying your favourite will not do. Matthew Tipping at Berry Bros & Rudd, the wine merchant, says: “Getting advice is crucial. Just because a wine is expensive doesn’t mean it’s a good investment. This year it’s all about champagne, burgundy and wine from Tuscany.”
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You should be prepared to take a five-year view, as a minimum, but also be aware that certain champagnes, for example, will spoil after ten years. It can be very lucrative if you pick the right wine. Mr Tipping recorded that the 2008 Château Lafite Rothschild released at £1,850 per six bottles in 2009, peaked in 2010 at £7,000 per six bottles, and is now selling at £2,650 per six bottles. However, cashing in requires finding a buyer, which is not guaranteed.
How to invest
A wine merchant can give advice and handle the purchase, storage and sale for you. As long as the wine stays in the warehouse it is exempt from duty and VAT; profits are free of capital gains tax.
Infrastructure
In a low-yield and volatile world, an investment in infrastructure can offer stable income returns. Infrastructure investment can be in big projects such as airport runways and superfast broadband and can provide a decent stream of income.
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How to invest
Ms Currie says: “The First State Global Listed Infrastructure fund looks for high-quality companies and many of its underlying holdings are quite defensive. The fund has a global focus . . . in developed world economies where the legal systems, regulatory frameworks and governance generally tend to be more robust.”