Investing the 'Flog It!' way
The field of investment isn't limited to shares, bonds and property. Some people also invest in physical goods such as antiques, paintings, stamps, watches and even wines.
The legal term for these items is "chattels"; tangible moveable property. It's possible to make decent money from buying and selling chattels if you possess specialist knowledge of a particular field, such as coins or modern art, because this should help you spot the occasional bargain and hopefully avoid the duds.
But it can still be hard to consistently turn a profit. Not only are your buying and selling costs very high, but finding people to take the things off your hands can be difficult -- unlike the stock market -- so you risk being stuck with a chattel that no-one wants.
But if that bottle of vintage wine or whisky turns out to be worth a lot less than you paid for it, at least you can still drink it!
Things that can be worth big money
Chattels provide non-monetary benefits, primarily the pleasure of ownership and impressing the friends and neighbours, and possibly some enjoyment as a hobby. But a few chattels, such as old cars and furniture, can also be put to good use.
If you watch television programmes like Antiques Roadshow, Bargain Hunt, Cash in the Attic, Dickinson's Real Deal and Flog It!, you'll already have some idea as to what tends to be bought and sold in British auction rooms, car-boot sales and dealers' showrooms.
A major part of the attraction of dealing in chattels is that you might come across something that turns out to be as "cheap as chips", and could be worth a small fortune if you can find a buyer. This usually happens if the seller doesn't have any idea as to its market value, or if the demand for this type of chattel dramatically increases in the future.
A good example of this is Clarice Cliff pottery, the price of which has skyrocketed in the last few years. Clarice Cliff items frequently appear on Flog It!, and I believe that this is partly responsible because of the extra interest that has been created as a result.
Dealing in chattels is expensive
Compared to shares, bonds and property, the cost of buying and selling chattels is huge. If you buy a chattel from a dealer, you won't get anything like the price you paid if you try to sell it back to them or another dealer, unless its value has risen sharply in the meantime or someone has made a big mistake when valuing it.
So, as an alternative to dealers and shows, people go to auctions. But this doesn't cut out the middle man because most auction houses nowadays charge both the seller and the buyer a commission of as much as 15% plus VAT. So you're looking a total cost of up to 35% for buying and then selling the same item at auction.
In comparison, if you buy and sell £3,000 worth of shares in a company where the difference between the prices (the bid-offer spread) is 1%, using an online broker who charges just £10, the dealing costs including stamp duty are about 2.2%.
eBay to the rescue
An alternative to traditional auction houses that has cut dealing costs is eBay, which currently charges the seller 10% of the sale price plus a small listing fee. Although, when it comes to high-priced chattels, you may be better off with a specialist auction website rather than a general auction site like eBay.
Auction websites are a good demonstration of how new technology can cut transaction costs, and many people have turned eBay into a second source of income by buying and selling chattels online and scouring car-boot sales and second-hand shops for stuff to sell.
Gains made on chattels aren't taxed, unless Revenue & Customs consider that you're doing it as an occupation rather than a hobby or if you make substantial gains. Generating a profit of more than £6,000 a year will attract their attention, as will openly operating as a business as some eBay sellers have found out to their cost.
Watch out for fakes
Buying and selling chattels incurs some costs that you don't see with shares, such as insurance, storage, valuations and the ever-present risk of buying fakes.
If you want to see some examples of the pitfalls of dealing in chattels, I recommend the classic BBC television series Lovejoy, which has returned to our TV screens in the afternoons on 'Yesterday' (Sky 537, Virgin 203 and Freeview 12).
Lovejoy stars Ian McShane as a loveable rogue who is an antiques dealer, with few scruples, who has the ability to spot forgeries and exceptional items. The show might put you off antiques because many episodes involve selling forgeries to a crooked punter or dealer, or have Lovejoy helping someone who's been the victim of a similar scam.
A few fakes have even turned out to be worth more than the originals, most notably Jean de Sperati's stamps and Spanish copies of British sovereigns from the 1860s and 70s, which were made with platinum. But these are most definitely the exceptions to the rule.
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