Buy gifts with added value this Christmas
British investors are turning to drink - and teddy bears.
But this is not about seeking comfort in gloomy economic times: alternative investments in wine, antiques, art and vintage toys are growing in popularity because people want to put their money where they can see it.
Alternative investments are often seen as a safe haven during turbulent times, but they aren't without risk. While they are generally valid assets, these kind of investments don't come with any guarantees and can be more risky than stocks and shares if you don't do your homework.
That said, if you're looking for a special gift this Christmas that could grow in value and delight its new owner for years to come, the choice is richly diverse. Here are some ideas to get you started.
Quality furniture and china can be enjoyed at home while they appreciate in value. The British Antique Dealers' Association (BADA) says antiques will often increase in value over the long term, providing you take expert advice, go for quality and buy the best.
However, you should buy something the recipient will love and want to live with, not just something you think could rise in value.
Auctions and antique fairs are good places to start, but always view items in advance. Inspect your finds carefully for signs of damage or restoration, which could affect their value, and find out the terms and conditions of the sale, plus the rate of commission.
BADA (bada.org) publishes lists of forthcoming antique fairs.
When using a dealer, look for a specialist. Check they are a BADA member, as they must follow a code of practice.
In most cases, no capital gains tax (CGT) is due when you sell an antique for less than £6,000.
A beautiful painting, photograph or sculpture will enhance the home of your family or friends, and if you're lucky, their wealth too.
And remember, it's not necessarily masterpieces by famous artists but artworks by complete unknowns - who may be the stars of the future - that can really deliver value for investors.
According to Jane Marshall at ArtCollecting.co.uk, it's possible to start an art collection with little or no money.
"Many artists struggle in their early careers and it's not uncommon for them to pay for goods and services with artworks," she says.
Marshall recommends visiting affordable art fairs and galleries, where you can find artworks costing just a couple of hundred pounds or even less. However, you can also pick up pieces for as little as £50 at art college graduate shows and studios.
Internet galleries have become increasingly popular in recent years, but you should take great care when buying artworks online as there are lots of scams around. Reputable sites adhere to the Safebuy code of practice, which stipulates a 14-day no-quibble returns policy and secure payment facilities.
It's also extremely important to store artworks properly in order to protect their value – check out the sites below for help and advice.
You may be a wine buff and know which bottle to store for an enjoyable tipple in future years, but it's still crucial to buy with care when investing in wine.
There are tales of vast profits in the wine world – and some are true. A case of Le Pin 1982, for example, cost just £200 when it was released but was worth about £25,000 a few years ago.
Not everyone, however, can expect such returns, and buying wine can be a complex business, which is where fine wine brokers and merchants come in.
The wine market is unregulated, so make sure wine stored for you is held in your name. To help you avoid scams, check the details of recent frauds and blacklisted companies on the investdrinks.org website.
If you're just starting out, consider one of the investment plans offered by many dealers. You pay a monthly sum and a broker chooses how best to invest it.
At Berry Bros & Rudd, established in 1698, customers can build a wine collection from £250. Experts will handle everything, keep you informed on your purchases and advise you when to sell.
"A simple mantra is buy the best wines from the best vintages at the right price," says Joss Fowler of the fine wine department at Berry Bros Rudd. "Prices can go down but big drops are rare. They fell in late 2008, but are back on the rise now."
A small range of funds track the market for investors who want exposure without buying stock. There's a wine index, Liv-ex, for true devotees.
Wine is exempt from CGT unless an investor wants to take delivery of their stock. But HM Revenue & Customs warns that wine stored as an investment must be marked down for inheritance tax purposes at the estimated sale price at the time of its owner's death, not at the price first paid.
Remember that wine brokers and merchants are not financial advisers.
Few gifts will delight a loved one more than a beautiful piece of jewellery.
"Precious metals such as gold, platinum and palladium are currently in vogue and rising in value, as are diamonds and semi-precious stones such as rubies, emeralds and sapphires," says Simon Rainer, chief executive of the British Jewellers' Association.
The organisation's website (bja.org.uk) has lots of useful information on how and where to buy, what to look for, where to sell, and your rights as a customer.
Rainer recommends purchasing from a reputable jeweller who is either BJA or National Association of Goldsmiths accredited and follows a strict code of ethics. Take your time when buying: ask to use the jeweller's loupe (or eyeglass) to scrutinise a piece for marks or imperfections.
For peace of mind, make sure jewellery is hallmarked and stones are certified for authenticity.
"Brush up on the four Cs of diamond grading – colour, cut, clarity and carat," says Rainer.
"Birmingham Assay Office provides a service, AnchorCert, that verifies a stone's authenticity and grading. Of particular concern at the moment are semi-precious stones that have been treated or filled to artificially increase their value."
Rainer's hot tip for 2011 are up-and-coming British designers, who are taking the market by storm. He recommends Platform in London's Hatton Garden, which showcases young jewellery design talent. You can find UK-based designers through the BJA.
When selling, items worth less than £6,000 will not attract CGT.
Useful link: bja.org.uk
This is an area where you can really let your imagination run wild. Think about the person you're buying for and what they might enjoy.
"You can invest in anything," says Toby Walne, author of 101 Extraordinary Investments: Curious, Unusual and Bizarre Ways to Make Money. Nostalgia is often the driving force behind investments ranging from Scalextric model racing cars to vintage teddy bears.
"Get clued up on what's out there and how much it costs", advises Walne. "Read specialist books and join special interest groups – enthusiasts will happily hold your hand."
As with art and antiques, invest in what you think the recipient would like, rather than buy something purely in the hope it will make money.
"Don't buy anything unseen or off the internet to begin with," says Walne. "It's better to pay over the odds with a specialist, as the market is flooded with fakes."
When it comes to price, don't necessary plump for the biggest and best. Focus on high quality: little defects, such as a missing dust jacket, a rip in a comic or missing original packaging, can wipe off more than half the value of a collectible.
Useful link: collectibles.about.com
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.
Capital gains tax
If you buy an asset – shares, a second home, arts and antiques – and then sell it at a later date and make a profit, that profit could be subject to CGT. You don’t pay CGT on selling your main home (which is why MPs “flipped” theirs so regularly) or any securities sheltered in an ISA. Individuals get an annual CGT allowance (£10,600 in 2010/2011) but if you have substantial assets it’s worth paying an accountant to sort it for you.