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27 Mar | Alternative Investments for Beginners

With interest rates at record lows and economic uncertainty still surrounding banks and various other financial institutions, finding alternative investment opportunities is more important than ever. If you are prepared to take some calculated risks with your capital, there are some exciting ways to grow your capital for a more secure financial future. Alternative investments may involve a level of risk, but the rewards can far exceed those currently being offered by mainstream institutions. If you are new to investing, here are some of the more popular alternative investment opportunities currently out there.

Peer to Peer Lending

If you are worried about your hard-earned savings stagnating in a high street savings account, making your capital available for consumer and business loans could be the answer. You can lend money via peer to peer services and take advantage of significantly higher rates of interest than are currently available with traditional banks. You can spread the risk involved by loaning relatively small amounts to several borrowers, as well as taking advantage of the numerous safeguards that are designed to protect your capital from fraud and borrower default.

Equity Crowdfunding

There are now several equity crowdfunding websites on the Internet that allow you to buy a stake in a start-up business for as little as £10. Of course, like any new business, the chances of failure are reasonably high, but this could be your chance to own part of a company that could grow into a highly profitable venture over time.

Angel Investing

You can use your capital to provide investment funds for new or developing businesses through angel investment networks. The companies pitching for your money will have already been vetted by the investment agency, so you can listen to several pitches before choosing the opportunity you believe has the best chance of success. You may have to wait until the company is floated or sold to secure a return on your investment, but you should be eligible for lucrative tax breaks via the government’s Enterprise Investment Scheme.

Fine Wine

While the minimum investment required is likely to be several thousand pounds, investing in wine through renowned merchants is a relatively secure way of making the best use of your capital. While the returns are modest, the best wines usually appreciate over time. Some wine funds also qualify for the Enterprise Investment Scheme, so you could secure some welcome tax relief in the process.

Venture Capital Trusts

Venture capital trusts (VCTs) are publicly traded companies. And just like any other company listed on a stock exchange, you can buy shares in them. Investment trusts of this type concentrate on investing in start-up and unlisted companies. Because the companies are largely unproven, there is a risk involved, but this type of investment is a great way to secure the growth of your capital over time.

There are also significant tax advantages involved in trusts of this type. Any income you earn from dividend payments will be exempt from income tax. When you finally cash in on your shares, any profit you make won’t be liable for capital gains tax. And provided you have held your shares for at least two years, your heirs will not be liable for the usual 40 percent rate of inheritance tax.

However, perhaps the biggest advantage associated with an investment trust of this type is the tax rebate it makes possible. You can claim up to 30 percent of your VCT investment back in the form of an income tax rebate. And because the current rules allow a qualifying investment of up to £200,000, you could claim back up to £60,000 – provided you have paid at least that much in tax within the current financial year.

The economic landscape is changing at an unprecedented rate, and new opportunities for growing your capital are appearing all the time. You can invest your capital in rare coins, stamps, forestry schemes, diamonds and a huge range of other, potentially lucrative alternative opportunities. However, only be seeking the expert advice of a financial advisor can you be sure that your first foray into the alternative investment market is a financially sound one.

Paul
rsvp@investorsoiree.co.uk