Damian Dovarganes
Race Horses
First the bad news. As a pure investment, owning race horses is a very poor idea. In fact, it will likely leave you poorer. The vast majority of players in the game are losers. It costs $30,000 to $40,000 to maintain a thoroughbred for a year, not including the cost of amortizing the purchase price. Let's assume you pay $50,000 to buy a horse as a yearling (prices range from $1,000 to many millions). Just to break even, you'd therefore have to earn $150,000 to $200,000 in four years. Most horses don't earn nearly that amount.
On the other hand, understood as a hobby that will likely cost you a bundle, racing - going to horse auctions, dealing with trainers, jockeys, shipping the horse to Florida or California for the winter season - can be a lot of fun. If your funds are more limited, the best way to put your foot in the stable is to join a syndicate. (Some racetracks, including Toronto's Woodbine, will help you find one.). This approach limits your outlay and your potential losses, while still providing the joys of (albeit fractional) ownership. If money is not an issue, most trainers will be happy to steer you in the right direction (and take your money). A reasonable starting investment is about $50,000.
Wine
Unlike horse racing, fine wine can actually make for a fine investment. The reasons are obvious: The product improves with age and is relatively scarce, fuelling demand. On the other hand, you are best advised to do a lot of homework, learning about market trends, wines likely to deliver the highest return on investment, and in the words of the famous Orson Welles commercial for the Gallo Bros, how to "sell no wine before its time." Less than one per cent of all the wine produced is considered investment grade, so expertise is essential.
There is, of course, a potential downside. The fine wine universe is ultimately a market like any other - and an unregulated one at that. There are no government officials tracking unscrupulous dealers that might be selling mislabeled merchandise. (A recent scam involving Bordeaux wines was valued at about $100-million U.S.) There will also be expenses beyond the acquisition costs (commissions on sales, insurance and storage fees that guarantee constant temperature and humidity). If you buy En Primeur, or wine futures, you'll be able to buy product at a discount but are gambling on evaluations that haven't been made, a higher degree of risk. And remember, the only dividend this investment pays comes in the form of consumption.
Coins and Stamps
According to Toronto dealer Peter Vlachos, buying rare coins and/or stamps is best understood as a hobby, not an investment. Mr. Vlachos ought to know: he's been in the business since 1967 and, while he has made a reasonable living, it's not an avenue he'd rush to recommend. The stamp business itself is moribund - too little demand chasing too much supply - and both sectors suffer from a general absence of liquidity. The paper side of the currency trade has lately developed a little steam; Mr. Vlachos recently paid $7,000 for a 1923 Canadian $5 bill.
Significant risks include counterfeit or, more commonly, over-graded coins. As a rule of thumb, the more detail and the fewer marks a coin has, the more it is likely to be worth.
Mr. Vlachos's best advice to prospective investors: do it for the love of the coins themselves, educate yourself about historical patterns and, when buying, stick as close to the current price for gold or silver bullion as possible.
Maps
Here lies another potential minefield for the unwary and the uninitiated. As a result, the single most important step you as a new investor can take is to align yourself with a trusted adviser. Even then, says La Jolla, Ca., dealer Barry Lawrence Ruderman, a former insolvency lawyer, the returns from such investments aren't huge - historically, about five per cent annually. Mr. Ruderman bought his first map - of the San Diego harbour -in the early 1980s for $65; he says it's now worth about $165).
But if the upside is limited, so is the down: rare maps rend to hold their value pretty well, even in soft markets. And in 20 years of trading, he says, he's only encountered a handful of forgeries. Still, the prime motive for entering this field should be personal passion. The beauty of maps, says Mr. Ruderman, one of the biggest Web-based dealers (he shipped to 70 countries last year), is that a collector's interest can be channelled in several directions: interest in the map-maker, the engraver, the map as art, as cartographic history, or as a memento of a family's story.
"The same map can appeal to 10 different people for 10 different reasons."