Demand for rare coins and other alternative investments jumps as pandemic batters markets

2020-07-06 14:35:00
Valuable coinage, whisky and even LEGO sets are among those assets being considered by investors as the coronavirus crisis roils global markets

The coronavirus pandemic and its ensuing lockdown have caused nearly unprecedented volatility in global markets, and as a result, investors have been searching for more secure places to park their cash until the worst subsides.

This rush for secure assets has led to increased demand for traditional havens such as gold, which has seen its value rise strongly during the pandemic and is currently trading at around an eight-year high of nearly US$1,780 an ounce as of July 6.

However, according to a report from online broker eToro, other investors are also considering investments even further removed from the mainstream markets including rare coins, whisky and even LEGO sets.

Rare coins

Rare coinage, which while not classed as an income-generating asset is deemed by collector’s to be an effective store of value, provided a buyer can accurately speculate on their potential to increase in value, mostly through scarcity.

This means coins with mirror changes or errors in their manufacturing can be worth lots of cash, alongside specific series of coins that can be more valuable in groups.

Demand for coins is also linked to the market in precious metals as government mints working to produce bullion to sell and meet demand, so holding onto gold coins can also net a tidy profit should prices of the yellow metal continue to climb.

LEGO sets

As strange as it may sound, LEGO sets can also serve as an addition to an alternative investment portfolio, potentially delivering returns better than the stock market itself.

In a 2018 paper from the National Research University Higher School of Economics in Russia, researchers said the colourful plastic brick kits had outperformed large stocks, bonds, gold and other alternative investments between 1987 and 2015, yielding an average return of at least 11% over the period.

“Small and huge sets, as well as seasonal, architectural and movie-based sets, deliver higher returns. LEGO returns are not exposed to market, value, momentum and volatility risk factors, but have a unit exposure to the size factor, suggesting that this asset performs similarly to small stocks”, the paper said.

LEGO sets are inf act so lucrative that they have even attracted the interest of criminal enterprises, resulting in an ‘underground’ market for the toys. For example, in 2014 police in Phoenix, Arizona broke a LEGO smuggling ring and recovered sets worth around US$200,000.

Whisk(e)y

One of the more traditional alternative investments, bottles of Scottish whisky and Irish whiskey are often seen as a novelty reserved for buyers who like a personal batch to mature and then enjoy a decade or so down the line, however, the classic spirit can also present a lucrative opportunity outside of a pleasant drink.

One method is to invest into whisky casks, a method that many distilleries employ to help alleviate the costs of producing the spirit as leaving it to mature can mean it is many years before the product reaches the market.

While individual casks can often come at large expense, some firms such as the Whiskey & Wealth Club buy huge volumes of freshly distilled whiskey at a wholesale price and then sell them to retail investors it in smaller groups of around six or more casks, known as ‘pallets’, at a small margin.

This option, according to WWC, allows investors to buy into whiskey casks for around £1,950, as opposed to around £8,000 for an individual cask.

The value of whisky investments can also be shown in the Rare Whisky Icon 100 Index, which tracks the worth of 100 highly sought after bottles. The value of the index has risen just over 400% in the last ten years.