Three alternatives to savings accounts: should you invest?

Three alternatives to savings accounts

If you're looking for a way to invest beyond traditional asset classes like cash, property and shares and are willing to take on more risk, there are plenty of alternative routes to go down.

You've probably heard of the money to be made by investing in stamps, coins, wine, whiskey and the like but did you know you could invest in car finance and sporting tickets?

We've rounded up a few alternative investment opportunities you might not have heard of that could prove very lucrative.

Peer-to-peer car loans

Peer-to-peer lending has become a genuine alternative asset class for investors searching for decent returns.

Generally, platforms work by putting investors in touch with borrowers that need a loan, cutting out banks and building societies, which usually means each side gets a much better deal.

Buy2LetCars is one firm that has taken the concept and applied it to car leasing.

The firm founded in 2012 allows investors to replace banks in providing car finance to fund lease vehicles for individuals with the chance to earn up to 11% IRR.

Investors provide a lump sum to fund the purchase of a new or second-hand car, which Buy2LetCars then arranges for a driver to lease through sister company Wheels4sure.

Repayments are made monthly and at the end of the two- or three-year loan term investors receive a final exit payment.

There are four options to choose from, which I've set out below. They are all based on monthly repayments over a 36-month term.

Level

Amount Funded

Units Funded

% IRR

Monthly Repayment

Gross Final Payment Month 37

Gross Interest

Level 1

£7,000

1

7%

£164.69

£2,054

£983

Level 1

£8,000

1

7%

£188.22

£2,347.43

£1,124

Level 1

£9,000

1

7%

£211.74

£2,640.86

£1,264

Level 1

£10,000

1

7%

£235.27

£2,934.29

£1,405

Level 2

£14,000

1

9%

£250.00

£8,080

£3,080

Level 3

£28,000

2

10%

£511.38

£16,382

£6,792

Level 3

£42,000

3

10%

£767.07

£24,573

£10,188

Level 3

£56,000

4

10%

£1,022.76

£32,764

£13,584

Level 3

£70,000

5

10%

£1,278.45

£40,955

£16,980

Level 3

£84,000

6

10%

£1,534.14

£49,146

£20,376

Level 4

£98,000

7

11%

£1,871.52

£57,071

£26,460

Level 4

£112,000

8

11%

£2,138.88

£65,224

£30,240

Level 4

£126,000

9

11%

£2,406.24

£73,377

£34,020

Level 4

£140,000

10

11%

£2,673.60

£81,530

£37,800

Level 4

£154,000

11

11%

£2,940.96

£89,683

£41,580

Level 4

£168,000

12

11%

£3,208.32

£97,836

£45,360

Level 4

£182,000

13

11%

£3,475.68

£105,989

£49,140

Level 4

£196,000

14

11%

£3,743.04

£114,142

£52,920

Level 4

£210,000

15

11%

£4,010.40

£122,295

£56,700

Level 4

£224,000

16

11%

£4,277.76

£130,448

£60,480

Level 4

£238,000

17

11%

£4,545.12

£138,601

£64,260

Level 4

£252,000

18

11%

£4,812.48

£146,754

£68,040

Level 4

£266,000

19

11%

£5,079.84

£154,907

£71,820

Level 4

£280,000

20

11%

£5,347.20

£163,060

£75,600

Though it might seem crazy to invest in a depreciating asset, Buy2LetCars founder Reginald Larry-Cole claims the firm simply offers a piece of what banks and finance companies have been profiting from for years.

However, the money you put in is not covered by the Financial Services Compensation Scheme so won't have any protection if Buy2LetCars goes under.

You could also lose money if a borrower defaults on a loan, though Buy2LetCars claims it has safeguards and reports it has had 0% defaults since 2012. All end of term transactions due to investors have been honoured and on time.

Compare peer-to-peer investment returns against savings accounts

Mini-bonds

Mini-bonds are essentially IOUs which firms sell in return for regular interest payments and the value of the investment returned in the future.

This alternative investment class has become a popular way for smaller businesses to raise cash, with the likes of BrewDog, Leon, Chilango and even Harlequins rugby club issuing mini-bonds over the last few years.

However, mini-bonds are unsecured, non-convertible, untradeable and returns aren't guaranteed so your money is at risk.

This asset class is also not covered by the Financial Services Compensation Scheme (FSCS) so if the firm goes bust you will lose your money.

Sporting debentures

Debentures are another type of debt security that can be issued by companies to raise funds. There are a broad range that you can go for, with some that pay interest and some that don't.

Last year there was an opportunity to invest in the Wimbledon No. 1 Court Debenture, which pays no interest but offers perks that could be lucrative.

The No.1 Court Debenture was available for a nominal value of £1,000, but investors had to pay a premium of £25,000 plus VAT at £5,000 taking the total to £31,000 per debenture.

The All England Lawn Tennis Ground plc the company which owns the Club's grounds wanted to raise £25 million to help fund a new retractable roof (ready for the 2019 Championships), additional seating and the creation of a new two-level public plaza.

The debenture lasts for five years and rather than paying interest, it provides a book of tickets for seats in the No.1 Court for the first 10 days of Wimbledon for five years and importantly first dibs on other Wimbledon debenture sales.

Investors only get back the nominal value or £1,000 for each Debenture held on maturity. This may sound like a terrible investment, considering you have to stump up £31,000, but the debentures and the tickets you get each year can be freely traded and are typically in high demand.

The Wimbledon tickets given out to debenture holders are the only tickets that are transferable. They can be sold to anyone for as much as you like but the AELTC and hospitality companies may buy up the tickets if there is enough demand.

Meanwhile, Numis Securities runs a market where debentures can be bought and sold.

One investor who invested in the 2011-2015 Centre Court debenture for £27,750 made a killing when they sold it for £90,000 in 2014.

With two years left to mature, they got £3,462 for each of the 26 remaining tickets for the Championship.

But none of this is guaranteed, so you are taking a massive risk with your money if you go for this type of investment looking for a big return.

Compare peer-to-peer investment returns against savings accounts

21 PHOTOS
Vintage money-saving tips
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Vintage money-saving tips
Back then there was no choice, because the mass-produced microwaveable meal was just a glint in a marketing guru's eye, but now, cooking from scratch can save substantial sums.
The older generation learned that there were meat-free days of the week to save money, and that if you had meat you''d stretch mince with breadcrumbs, or buy cheaper joints and use every scrap.
Perfect fruit and vegetables and top-of-the-range brands are a new phenomenon. Buy generic non-branded food and fruit and vegetables in whatever size and shape is most affordable

Nowadays we rush around the supermarket grabbing things we like the look of - with little idea of what we're going to do with it. Making a list and thinking about what you buy can save you thousands of pounds over the course of a year.

There's no such thing as 'left-overs' there's just the ingredients for tomorrow's dinner. The remains of the meat can be stir-fried the next day, the vegetables blended into  soup, and the potatoes saved for bubble and squeak.

Try an experiment and eliminate everything from your life with the word disposable in the title. Not only will you save money, but your bin will take far longer to fill too.

Before you bin anything, think twice about whether you can give it a second life. Think carefully, does your granny have her tried and tested tips that she has a habit of mentioning, for instance, washing out freezer bags? If you mock, you're missing a trick and wasting money and resources.
Cutting out draughts and insulating your home properly can cut 10% off your heating bill.
Back in the 1940s when no-one had central heating, people got used to wearing another layer at home. Try lowering your thermostat gradually, and only stop when those around you start to notice - you'll be surprised how much you can save.
If you save your washing and dish washing until you have a full load every time you'll save energy and save money.
Over the generations we have been sucked into believing the hype. In the days when adverts were few-and-far between, we managed without many of the things we consider essential nowadays. Re-consider what you buy, and why. Without advertising, would you buy any of it?
It's always cheaper to save in advance and plan a purchase than to rush in and borrow - which could end up costing you hundreds of pounds more in interest.
Older generations typically withdraw what they can afford to spend in cash and then leave their debit card at home or deep in their wallets. This has the advantage that they don't tend to reach for a debit or credit card and spend more than they can afford.
Because the older generations couldn't borrow their way out of trouble, they tended to plan more. Give your family a financial safety and a nest egg for the future.
Back when there were only a finite number of items of clothing to go around in a neighbourhood, people borrowed from each other for special occasions. Nowadays swapping and sharing can save substantial sums
Back in the 1940s when no-one had central heating, people got used to wearing another layer at home. Try lowering your thermostat gradually, and only stop when those around you start to notice - you'll be surprised how much you can save.
There was a time not so long ago when no-one could actually remember anyone who had actually bought a bike. They were passed through the siblings, then across family and friends networks, so that decades later, children were still learning to ride a bike for free. Of course it helps if you buy something gender-neutral, then you can hand it down, and reap the benefits as others hand expensive toys on to you.
In previous generations, neighbours would think nothing of asking each other to babysit, walk their dog, or to borrow a ladder. Nowadays we pay handsomely for babysitters and dog walkers, and each have an expensive ladder gathering dust in the shed.
The army of people who come to our homes to do odd jobs is a new phenomenon for all but the very wealthy. You may well have the skills required to complete these jobs, so get stuck in.

Ditch going out for dinner or browsing round the shops for taking a walk, visiting the beach with a picnic, or holding a family DVD night.

Nowadays we're constantly striving for a bigger TV, a flashier car and a better kitchen. Generations ago people never considered that they would ever be able to afford bigger, flashier and better, so they got on with the business of enjoying what they had.
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