Give a gift that grows in value this Christmas
Many people will wake up to a stack of presents under the tree on Christmas Day, only to dispatch most of them to the recycling bin just days later. Rather than splashing out on the latest Xbox or iPhone, why not buy gifts with added value that the recipient can both enjoy, and treat as an investment?
"Buying 'real' assets such as wine, gold and art can make a nice gift as well as being potential investments," says Justin Modray, founder of Candid Money.
"These types of investment have generally stood up as well as stockmarkets have crumbled in recent years, because many investors seek investments with a tangible value rather than just being bits of paper."
FIRST EDITIONS OF CHILDREN'S BOOKS
More than 18 million books were bought over the festive period last year, according to the Publisher's Association. Many have no doubt languished for months on the bookcase, doomed never to be read.
However, buying first editions of your children's favourite books is a way to give a sentimental gift with added value, says Adrian Lowcock, senior investment adviser at broker Bestinvest.
"Although the child wouldn't be able to read them, first-edition copies of Harry Potter and the Philosopher's Stone, for example, are worth a significant sum," says Lowcock. Four years ago, one of the 500 first editions of the Harry Potter novel sold at auction for more than £7,000.
Luke Batterham, book specialist at Bonham's, says authors such as Roald Dahl, Beatrix Potter and AA Milne all have value as investments. "The key thing when buying first editions is the condition," he says. "A never-read book is the most commercially successful, while a personal connection - an inscription from the author, for instance - is worth more."
Batterham highlights a 1908 first edition of The Wind In The Willows with an inscription from the author, which recently sold at auction for £38,000.
It's known as the wine that can be enjoyed at any time of the day - including breakfast. Aside from being a tipple we enjoy once or twice a year, the fizzy stuff also boasts a strong investment case.
Unlike other assets such as property or equities, it's a much less volatile investment, as generally, the price will always steadily increase.
"The golden rules to follow when investing in champagne are: stick to the best producers such as Krug and Salon, and always invest in vintage champagnes," says Stephen Williams, managing director of the Antique Wine Company.
Champagne produced from a specific vintage, which are only declared in the best years, are of a higher quality than those of a non-vintage. By dint of this, they attract more interest and therefore have a higher value as an asset. "These are key factors in making a champagne investible," says Williams.
As an example, the 1995 Salon Le Mesnil vintage has outperformed the FTSE 100 over the past four years, and over the same period the price of a case of the champagne has increased 38% from £1,477 to £2,400.
Williams adds that champagne is only an investment item when sold in a case - 12 bottles - so don't be tempted to crack into it if you're planning on selling it later on.
With low interest rates on offer from banks and building societies, it's no wonder more consumers are turning to premium bonds for respite in an environment of high inflation.
According to National Savings & Investments, more premium bonds have been sold in the last seven years alone than in the previous 48 years.
"They're available from £100 and give the holder a chance to win a £1 million monthly jackpot, although you're far more likely to be struck by lightning than scoop the big win," says Modray of Candid Money.
Nevertheless, investors cannot lose the initial stake and smaller prizes range from £25 to £100,000 for each bond held.
Physical gold - or bullion - is an iconic and timeless gift. Bullion can be bought in bars and coins, with the latter having the benefit of divisibility.
There are all kinds of coins to choose from, from the Krugerrand and the Britannia to the Chinese Panda and the American Eagle, with some being more sought-after by collectors, and therefore more expensive. Gold coins are available from a wide range of retailers, including the Scoin Shop, Chard and Gold Investments.
"Gold coins, which will hold their value regardless of actions by the Bank of England, are about as good a gift as one can give. With the financial crisis seemingly worsening by the day, giving someone some 'just in case' money seems like a perfect Christmas gift," says Thomas Paterson, chief economist at Gold Made Simple.
"There are some great ways to give gold from as low as £35. You can buy gold grams - a fractional ownership of a bigger bar - so while you won't physically give gold, you will still be able to give a certificate bestowing ownership of the gold gram.
"A UK gold coin containing 7.3 grams of gold (a troy ounce contains 31.1g) can be bought for under £300, which makes an attractive gift option."
Owning a painting could be a good investment as well as something beautiful to hang over the mantelpiece, and as an asset, art has seen a quiet rise in fortunes. At the end of September, the Mei-Moses All World Art Index had risen 4.1% in the year to date.
"The market for established mid-20th century and early 21st-century art is booming. Artists from the north of England, such as Lowry in particular, have seen an amazing surge in value," says Bill Clark, owner of Clark Art Gallery in London and Cheshire.
Clark adds that an "increasing number" of parents are buying art for their children as part of inheritance tax (IHT) planning. Remember, you must survive for seven years after the gift is made for it to be free of IHT.
This article was written for our sister website Money Observer
A South African coin first minted in 1967 that consists of one ounce of 22-karat gold. It was introduced as a means of increasing the private ownership of gold in South Africa and was originally intended to circulate as currency. As numerous countries banned private ownership of gold bullion, investors in the USA and the UK could hold gold coins and so began to hoard Krugerrands illegally, as some countries banned the import of Krugerrand as part of sanctions against the apartheid South African government. More than 50 million Krugerrands have been minted since 1967.
A form of National Savings Certificate, premium bonds are effectively gilt-edged securities: you loan your money to the government and, in return, it pays you for the privilege with a guarantee it will return your capital at a specified date. Where premium bonds differ is that the interest payments (currently 1.5%) are pooled and paid out as prize money and you can get your cash back within a fortnight, with no risk. Launched by Chancellor of the Exchequer Harold Macmillan in his 1956 Budget, every single £1 unit has the same chance of winning and in May 2011, 1,772,482 winners (from a total draw of 42,539,589,993 eligible bond numbers) shared £53,174,500. The odds of winning are 24,000 to 1 and the maximum holding is £30,000 per person but it remains the only punt in which you can perpetually recycle your stake money.
The tax levied on the total value of your estate after you die. IHT has to be paid by the beneficiaries of your estate before they can receive any of the money from it. The money can’t be taken from the value of the estate _– it has to be paid before any money can be released. There is an IHT threshold – known as the “nil-rate band” – below which no tax is levied (£325,000 in 2011/12). Any amount above the nil-rate band is subject to tax at 40%. If your estate totals £600,000, there is no tax on the first £325,000; however your estate will pay 40% tax on the remaining £275,000, a total of £110,000. Prudent tax planning can reduce your IHT liability, so always consult a specialist solicitor.
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).
A market-weighted index of the 100 biggest companies by market capitalisation listed on the London Stock Exchange. It is often referred to as “The Footsie”. The index began on 3 January 1984 with a base level of 1000; the highest value reached to date is 6950.6, on 30 December 1999. The index is “weighted” by how the movements of each of the 100 constituents affect the index, so larger companies make more of a difference to the index than smaller ones. To ensure it is a true and accurate representation of the most highly capitalised companies in the UK, just like football’s Premier League, every three months the FTSE 100 “relegates” the bottom three companies in the 100 whose market capitalisation has fallen and “promotes” to the index the three companies whose market capitalisation has grown sufficiently to warrant inclusion. Around 80% of the companies listed on the London Stock Exchange are included in the FTSE 100.
An interchangeable term for shares (UK) or stocks (US). Holders of equity shares in a company are entitled to the earnings and assets of a company after all the prior charges and demands on the company’s capital (chiefly its debts and liabilities) have been settled. To have equity in any asset is to own a piece of it, so holders of shares in a company effectively own a piece proportionate to the number of shares they hold. (See also Shares).