Many people simply don’t know what to do about increasing their capital for a rainy day.
One piece of advice, however, cannot change: buy low, sell high. This is the key to all investment success.
The thing is, many people don’t know what ‘low’ or ‘high’ are in relation to orthodox investments. Also, orthodox investments are not as solid as they used to be. So why buy stocks and shares when you are not a stock market expert?
Alternative investments can be very rewarding and tax-efficient. They include fine wine, antiques, watches, stamps, classic cars and art. Many people have a reasonable knowledge of these items, but fail to use it to their advantage.
Yet investors need to adopt unorthodox thinking in these volatile times to ensure good, tax-effective returns.
So long as you do, in fact, buy low and sell high, does it matter with which commodity you deal? And there are no fund managers or brokerage fees involved in selling, say, antiques, depending on the platform you use to sell them.
Many farmers already have items on their farms that, restored to a good condition, would sell for a handsome sum. Talk about buying low and selling high! If the item is already there, the only cost involved is the preparation for sale.
As for capital gains tax (CGT), Paragraph 53 of the Eighth Schedule excludes ‘personal use assets’. Even boats less than 10m long and aircraft that weigh less than 450kg are excluded. Coins not made of gold or platinum are also excluded.
This creates a very wide range of potential alternative investment avenues, where the sale of the items are, in fact, tax-free.
How many farmers have sheds full of all manner of interesting goods, from old coal-burning stoves to antique tools?
Yet they persist in investing in assets that are not only taxable, but require great expertise to ascertain their worth.
It’s easy to sell high or buy low when you know the value of the assets being dealt with. In contrast, stock market and other investments are governed by so many variables that only a highly paid expert can get to grips with them.
But that old Land Cruiser or Land Rover under the tarp is easy to value. Just pick up a classic car or 4×4 magazine.
No expert required, no tax on the sale, no brokerage fees, and no fund managers. The seller is in charge of the process, from picking it up out of the dirt to final polishing.
You might be the richer for it, and there’s an element of fun in it too.
Advocate Peter O’Halloran is a tax specialist.