Unusual investments are not helpful during tough economic times

Consumers need to make a difference between liquid portfolios and investments such as wine and antiques during tough economic times, claims a financial planning expert.

Bloomsbury Financial Planning has countered claims that unusual investments are a good way of putting diversification into an investor’s portfolio.

Jason Butler, partner at Bloomsbury Financial Planning, said: “I’ve got a fine wine cellar I’ve been building up over the last couple of years, [but] I’m not buying it as an investment, I’m buying it because I want to drink it! If it happens to go up [in value], that’s great.”

He warned that consumers should beware of confusing enjoying assets which may or may not go up in value with investments which are liquid traded.

In December 2007 Decanter magazine reported that during that year, fine wine increased more than any other investment except oil.

According to the Liv-Ex index, the measure of fine wine values, wine increased by 39 per cent across 2007.

Tags: december 2007 decanter, Index, Bloomsbury, wine, financial planning

Buy-to-let ‘out of reach’

The buy-to-let market is now out of reach of the ordinary investor, due to spiralling prices, it was claimed this week.

The Royal Institution of Chartered Surveyors (RICS) has found that the average deposit a would-be landlord needs to put down to get hold of a rental property is £65,000, or 30 per cent of the property’s value.

In early 2002, this figure was just £10,100.

The increase has been brought about by factors common across all parts of the housing market, such as high interest rates and contracting supply, but also by factors specific to buy-to-let.

In particular, rental cover ratios for mortgages are high, with most landlords being asked to ensure that rental yields on their properties will cover 125 per cent of the mortgage before a lender will consider handing the money over.

Senior economist at RICS David Stubbs said: “It takes more capital than ever to set up a buy-to-let investment. Would-be investors who have missed out on the impressive returns of previous years are now finding the hurdles to property investment are higher than they imagined.

“However, existing landlords should be able to use the equity in their past investment properties to fund the deposit needed for new ones, and this should ensure that demand from the buy-to-let sector does not dry up entirely.”

Tags: David Stubbs, equity, RICS, Chartered, royal, investor