Although people's savings and investments are mostly placed in financial products, significant sums are also placed in non-financial items such as paintings, stamps, antiques, etc. These items are known as collectibles or alternative investments, and are chosen because they increase in value with time.

Such investments can allow you to enjoy ownership (eg. a painting can be hung on your wall), but do not usually provide any form of income. Any growth in value can only be realised upon sale of the item.

Are there any tax benefits?

In general, the only tax involved in alternative investments is capital gains tax when you dispose of items. Some exemptions may apply for certain types of object, but if HMRC believe you are trading you may have to pay income tax on your profits.

How risky are alternative investments?

When choosing items for alternative investments you need to consider the following points:

• Are restoration, storage and insurance required? These will all add to the cost of your investment.
• Can you judge the quality and authenticity? Poor quality items and fakes will affect your returns.
• Will tastes change? If they do you may not be able to sell your item at all.
• Is there a large market? If there are many collectors then you are likely to see a good return on your investment, particularly for rare items.
• Is there an intrinsic value? eg. the metal content of coins, or the beauty of a painting. Even if it turns out to be a poor investment you can at least enjoy owning a painting!

What alternative investments are available?

You can buy anything you want privately, bearing in mind the risks involved, but there are now a number of companies specialising in collectibles for investment.

These companies have a lot of expertise in the items they offer, so you can be sure of quality and authenticity. If required, they will also provide storage and restoration services and arrange insurance.

Some of the collectibles available in this way are:

Stamps - many people collect stamps which means there is a high demand, ensuring low volatility. There are stamp indexes, similar to the FTSE for shares, which reflect current trends in stamp prices. The SG 100 of the top 100 stamps being traded has shown a cumulative increase of greater than 90% since it's launch in 2000.

Autographs - constant media attention has led to a boom in autograph collection. Over the last 12 years, Fraser's Rarities Index of autographs has shown an average compound increase of 12% per year. Autographs are highly desirable, becoming even more so upon the death of someone famous.

Coins - there are many coin collectors all over the world, ranking second only to stamp collectors. Thus there is a high demand for these items, which also benefit from their intrinsic value (eg. gold coins are never worth less than their weight in gold). According to Avarae (the UK's only publicly traded specialist Investment Company dedicated to investing in rare and high quality coins) annual compound returns are historically in excess of 10%.