As a smart person once said, diversification is the only free lunch. And if the current coronavirus crisis has taught us anything, it is to make sure our investments are diversified.
The idea behind diversification is that it spreads our risk. When it comes to investing in financial assets, we ensure diversification by investing in funds that provide exposure to local and offshore equities, bonds, property, gold, and cash.
Increasingly, investors are looking to non-financial assets to provide further diversification.
Art has always been one of the favourite ways for high-net-worth individuals to protect assets – but it takes knowledge, expertise and usually quite a bit of money to enter the art world.
What is becoming very popular in South Africans is investing in agriculture.
There are several platforms in South Africa which provide investors with an alternative income-generating asset while bringing a crowdfunding solution to farming.
Basically, it allows an investor to become a farmer without needing to know anything about farming.
Fedgroup Impact Farming allows investors to directly purchase a blueberry bush, solar panel or beehive and earn the income that the asset produces
Another growing area is cattle which is especially relevant in Africa where it represents a tangible value and underpins financial agreements like lobola.
Livestock Wealth and SV Capital are two platforms that currently allow investors to buy cows.
If you have recently bought meat, you will know that beef prices have held up well during the lockdown.
The SV Capital model works on fractional ownership. The herd is pooled together – like an investment fund – and investors own a fraction of a cow.
In the case of Livestock Wealth, investors buy an actual pregnant cow or a calf. Livestock Wealth has also diversified its offering into macadamia nut trees.
The great thing about investing in agriculture is that not only does it diversify your investments with market-related returns, but it supports the growth of small farmers and protects South Africa’s food supply.