Alternative investments Flashcards
What are the main alternative investments?
World of art and collectibles - don’t usually generate income, cost money to keep, authenticity is very important
Commodities - can invest in companies that produce commodities or funds that invest in them or in ETCs
Cryptocurrencies
What are hard commodities?
Products of mining etc
Examples are gold, silver, natural gas, oil
What are soft commodities?
Typically grown
Examples include coffee, sugar, wheat, cocoa, corn, livestock
What risks are associated with commodities?
Volatility/frequent imbalance between supply and demand
Market dominated by big companies and traders
Demand affected by business cycle
But can offer useful diversification, tend not to move in same direction as other asset classes
Direct investments is rare and to benefit from an increase in these a derivative, tracker style investment such as ETC is used
Describe cryptocurrencies
Digital currency system produced by computer
Most famous is bitcoin
Highly volatile totally unregulated
Value linked to US dollars so currency risk
Payment processing system is called a Blockchain
Each Blockchain is unique to each user
‘Mining’ is computer accounting and confirms transaction is legitimate
Transactions anonymous and not backed by government/central banks
Innovative finance
Crowdfunding or peer to peer lending
can be used as an ISA investment in an Innovative ISA
money invested used to fund innovation and entrepreneurship
returns are interest for the loan made
typically lend via 3rd party ie Octopus
Structured product - how does a kick out plan work?
It can automatically mature prior to the scheduled maturity date if certain conditions are met. It pays out a defined return providing a predefined event takes place.
