In this section Hannah Barnaby considers investment opportunities that lie beyond traditional shares, bonds, property or cash and looks at some of the more unusual and potentially lucrative opportunities that could be considered as part of a diversified investment portfolio.

As with any investment strategy, understanding and managing risk is a key consideration and with alternative investments that is all the more relevant as it may not always be possible to make apples and apples comparison of products and many will not be bound by the rules that deliver transparency and protection to other asset classes.

Investments such as peer-to-peer lending and crowdfunding are becoming a much more familiar part of the investment landscape and they are considered herein as well as some more esoteric opportunities.

As a small part of the DIY investor’s portfolio there may be a place for investing in stamps, parking spaces, student accommodation, films or even fine wine, which may admirably fulfill the brief of a liquid asset that suggests a perfectly palatable exit strategy should the market move against you!

In fact fine wine may provide a good example of why it may be worth considering alternative investments – fine wine achieves 12 – 15% annual returns over a long time horizon and fine wine has outperformed global equities 98% of the time since 1998.

The investments hereunder are available to UK investors, although they are not all UK-based; almost all carry more investment risk than your capital would be exposed to by holding a portfolio of more ‘traditional’ investments.

Buy-to-Let Property


The cost of entry to the buy-to-let property sector is high as you may need to put down at least a 25% deposit to qualify for a buy-to-let mortgage, and you will also require a cash reserve to cover any refurbishment, legal fees and emergencies.

There could also be periods when the property is un-let but still incurring fixed costs that you, as the landlord, will have to find; buy-to-let is a hands-on investment even if you hire a letting agent and you could be faced with rogue tenants and maintenance problems.

The landscape is changing too, as buy-to-let mortgage tax relief is being replaced with a 20% tax credit and from April 2016 stamp duty will be 3% on homes between £40,000 and £125,000, 5% up to £250,000 and 8% up to £500,000.

Then you need to find a property that will ideally give you reliable income to cover the mortgage payments and benefit from a generally rising property market.

Also, unless you’re particularly well-heeled, the property will form a large part of your overall net worth and combined with your primary residence, you could be disproportionately vulnerable to a fall in property prices or a collapse in the rental market.

If investing directly into buy-to-let property is not for you, it is also possible to get investment exposure to the property sector by finding a mutual fund or investment trust that invests in a portfolio of properties.

Real estate investment trusts (REITs) are closed ended companies that own, and in most cases, operate income-producing properties. They may own many types of property, ranging from office and apartment buildings to warehouses, hospitals, shopping centres and hotels.

REITs are investment companies that can be bought and sold as investments on a recognised exchange and since 2012 have traded on the London Stock Exchange’s Alternative Investment Market (AIM).

Foreign Exchange

Once the territory of major financial institutions, internet technology now enables the DIY investor to trade global foreign exchange markets on their chosen device, alongside their other investments.

Online FX platforms now deliver real-time quotes, charts, historical data and news to retail investors at the click of a button who now account for $250 billion, or around 5%, of FX trades per day.

FX is what’s known as an ‘over the counter’ or OTC market which means that there is no centralised exchange or mechanism; rather there is a global network of buyers and sellers of currencies and as much as any external influence it is the speculation or sentiment of market participants that moves prices.

Pairs of currencies are traded with a bid/offer spread and the price you trade at depends upon whether you are speculating on the base currency to strengthen or weaken; those new to FX trading may wish to begin with a modest investment into relatively mainstream currency pairs until they are familiar with the opportunities and potential perils of leveraged trading that are considered elsewhere on this site.



Considered elsewhere on this site in more depth, products such as unit trusts, investments trusts and exchange traded products now give the DIY investor access to sectors that were previously the domain of institutional investors or very wealthy speculators.

Precious metals, minerals, and food products can now all find a home in the DIY investor’s portfolio; who wouldn’t want to announce at the golf club that they’ve just gone long on pork bellies?

Having said that, with oil prices currently on their knees and commodities seemingly to blame for the downward trajectory of many major international bourses, this may be a sector to invest a little time getting to grips with, whilst waiting a while before plunging in; unless of course your research leads you to believe that prices have hit their point of support and the only way is up.

Peer-to-Peer Lending

Platforms such as Zopa, Ratesetter and Funding Circle match investors with individuals or businesses who want to borrow money; borrowers can get lower rates than they would be charged by a bank, and lenders can earn more interest on their savings than they could from a deposit account.

The risk is that the borrower will default on the loan, so it is important to understand the risk profile of any loan that you undertake.

As peer-to-peer (P2P) lending has become more mainstream over recent years interest rates available have fallen; in 2011 interest rates well in excess of 5% were common,  but unless you are prepared to take on the additional risk of lending to less credit-worthy borrowers, rates closer to 4% are now the norm.

P2P loans will be allowed to be sheltered in Innovation Finance ISA wrappers from April 2016 which could make them a little more attractive, although it doesn’t make them any less risky.


Business Angel Investing

As a ‘business angel’, you invest in smaller, unquoted companies just like a real life ‘Dragons’ Den’ – back the right horse and the returns can be stellar, get it wrong and your investment can evaporate.

Even if the company is successful, investors are unlikely to see any return until the business is sold or floats on the stock market which could take years, or may never happen; the investment required could be sizeable.

Networks of business angels vet companies and allow them to present to their members; investors may be eligible for tax breaks through the Enterprise Investment Scheme (EIS) or Seed Enterprise Investment Scheme (SEIS).


Equity Crowdfunding


Platforms deliver similar start-up and early stage investment opportunities as business angel networks, but manage everything online; sites like Crowdcube and Seedrs allow investors to take a tiny stake in start-up businesses from  as little as £10.

There are two different models for equity crowdfunding, in one there is a direct relationship between the company and its investor and in the other the platform pools investments and acts as a nominee in its relationship with the company.

Aside from the obvious risk that the company fails and takes your investment with it, early stage investors risk their stake being diluted by future rounds of funding so it is important to understand what guarantees are in place before making an investment.


Bridging Finance


Bridging loans are short-term loans to property buyers awaiting confirmation of the grant of a mortgage; an example might be a landlord needing money to refurbish a rental property, but not qualifying for buy-to-let finance until the work has been completed.

Private investors can invest in funds that pool bridging loans, thereby spreading the risk across several borrowers; although the loan is technically secured against the property, it would take time to recover any money in the event of default

In the past a minimum investment in these funds was around £25,000, but more recently companies such as LendInvest have offered investors a route into this market from just £10.



Returns can accrue from investing in forestry if there is an increase in the value of the land, and any income from felling trees on it.

Capital appreciation may only be realised when land is sold, which requires finding a buyer so the attraction in such an investment may be the income it delivers.

On the whole, forests don’t come cheap, but some unregulated schemes offer access with minimum investments of less than £30,000 and returns may be in the region of 5% p.a.

Investment in woodland incurs no income or capital gains tax and is exempt from inheritance tax if you hold your investment for two years or more.


As long as there are philatelists, rare stamps will have a value and some may command six-, or even seven-figure sums.

Stanley Gibbons offers private investors ready-made portfolios of rare stamps with a minimum investment of £10,000.

The company would have you believe that this is an asset class that cannot be licked as an investment opportunity, although it does hold a dominant position in one of the smaller market sectors.


Fine Wine


Fine wine is one of the less high profile investment markets, yet over a long time horizon wine can be shown to deliver greater, and more reliable, returns than many other asset classes.

Wine as a serious investment is typically confined to wines from the Bordeaux region, such as Chateau Lafite and Chateau Latour.

A number of traditional wine merchants such as Berry Brothers and Rudd offer wine investments, companies such as Cult Wines will help you build a diverse portfolio with a minimum ‘suggested investment’ of £5,000 and there are now a number of wine funds that offer an alternative way to access the market although there have been some high profile casualties.

Whilst a truly gung-ho DIY-er may decide to go it alone, it is possible to buy cases of investable wine for no more than a couple of hundred pounds, but to build a truly diversified wine portfolio probably does require an investment in the region of £5,000.

Wine funds are unregulated collective investments and come with no FSCS protection; however as a ‘wasting chattel’ or a commodity with a limited life span, wine does not attract capital gains tax and it may be a space where an agreeable hobby meets a profitable investment.


Other Alternative Investments

Solar power – there are an increasing number of opportunities to tap into growing solar energy markets.

Typically, investments are issued as debt securities (bonds, or mini bonds) whereby you lend money to a company that then purchases and installs solar farms and sells energy to the respective local grid.

Such investments may offer attractive headline rates of return but it is important to understand if any security is offered and what would happen if the company goes bust as happened when Secured Energy Bonds, a subsidiary of an Australian firm called CBD Energy, went bust in 2015 leaving those with its 6.5%, three year bonds up a gum tree.

Funding for Lending  – ahead of the introduction of the Innovative Finance ISA, P2P lender Wellesley and Co issued the first funding for lending retail bond in 2015; the Dublin listed bond offered 4% for a three year investment and 5.25% for five and the company used the money raised to issue as loans to its clients.


Diamonds – those investing in value gemstone-grade diamonds may wish to get De Beers in because values have risen tenfold since 1961.

Diamond prices are much less volatile than gold, partly because one company – De Beers – has such a strong influence on the market, producing over a third of the world’s diamonds.

Carbon credits –
a carbon credit is essentially a permit to release one tonne of carbon dioxide into the atmosphere; companies are ‘granted’ the right to produce a certain level of emissions and if they exceed that allowance they are required to buy additional credits via the open market.

However, the system depends upon global cooperation, and the fact that the US and China are not on the team sheet could indicate a fundamental flaw in this particular concept.

More often than not the DIY investor’s acquaintance with carbon credits will have been via a phone call from an eager beaver selling ‘the next best thing’

Land Banking –
a company buys a piece of land, divides it up and sells it off to investors with the hope that the housing crisis is so acute in the UK and the pressure on land so great, that at some stage it ‘simply must’ be granted planning permission, whereupon its value will go through the roof.

However, many a would-be self-builder or speculator have been left with pieces of land, both here and abroad, with a series of pegs marking out the boundary of the worthless fiefdom.

The Financial Conduct Authority (FCA) has shut down several land banking schemes in recent years and this is probably not an opportunity to cash in an annuity in favour of.

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