Commercial forestry holdings The advantage of this investment is that it is free of income and capital gains taxes and, if held for at least two years, is excluded from your assets for inheritance tax purposes.
The disadvantage is extreme illiquidity and volatility in value.
Investing in commodities Anyone can buy a commodity, whether it be a metal, farm produce such as grain or coffee, or even wine.
The objective is to hold the commodity in the expectation that it will increase in value.
There is extra expense because of storage, insurance and perhaps shipping costs.
A more risky way of investing in commodities is to buy or sell futures or options in commodities.
A less risky way is to invest in companies or investment or unit trusts which deal in commodities or commodity companies.
Buying convertibles These are bonds or shares issued by companies, earning fixed interest or dividends, which are subsequently convertible into equity, i.
e.
ordinary shares.
They are usually redeemable before conversion.
Conversion can take place after a specified date in the future at a set price which is usually in excess of the ordinary share price when the convertible is issued.
The conversion premium is the amount by which the equity share price must rise to make conversion worthwhile; it can be a negative amount.
Initially, market price is controlled by current interest rates.
As the conversion date nears, the equity share price has increasing influence.
Convertibles can be very valuable if the share price goes up but meanwhile should be judged on the fixed return.
Understanding EISs and VCTs EISs are enterprise investment schemes, where the investment is in one company.
VCTs are venture capital trusts, which are pooled investments.
In both cases, they are investments in new companies.
Investments for at least fiv6 years (three years for new issues after 6 April 2000) in new qualifying schemes receive tax relief at 20% at the time of investment.
The annual limits are high £100,000 in each case.
Capital gains are tax free and, in the case of VCTs, so are dividends.
Furthermore, CW liability on any investment realised to make the investment can be deferred till the new investment is realised.
Losses on disposal of unquoted shares in an EIS investment can be set off against income.
Also the allowances on EIS investments remain even if listing of the shares is sought within the initial period.
But these investments are risky because they are in new companies very risky in the case of EISs, where all the money is put into one company, less so for VCTs where the risk is spread.
Backing films This is very risky as few ventures succeed.
There is a tax advantage - production costs receive 100% relief from income tax provided they are less than £15 million and are at least 70% insured in the UK.
Becoming a Lloyd's name Lloyd's of London is an insurance organisation.
Members (called names) who put up capital as underwriting collateral get 100% relief from inhefitance tax provided they have been members for at least two years.
However, you first need to have large sums to invest and your liability is unlimited so, although it can be very profitable, it is extremely risky.
Using offshore funds You can invest in investment trusts and unit trusts.
based outside mainland UK, in tax havens such as the Channel Islands.
If you are resident in the UK, both income and capital gains are taxable in the UK and there is noindexation or taper relief for gains, but income in certain funds is 'rolled up', i.
e.
left in, and is not subject to tax until disposal of the investment.
On disposal the total gain is treated as income but this might be advantageous to you if you are going abroad to live before then or if your income after retirement is such that you have a lower marginal tax rate.
Not many people fall into either category.
Charges can be much higher than in the UK.
Also investment protection is lower than in the UK and in some places is non existent.
Buying penny shares Shares with a low unit value (though not necessarily a penny) are known as penny shares.
The official definition is where the bid/offer spread exceeds 10% of the share price and the market capitalisation of the company is below £100 million.
Often they are companies which have been in trouble and the share price has fallen to a very low level.
There is a proliferation of penny share tipsters and enormous profits can be made but also enormous losses.
Penny shares are very risky because:

• the wide bid/offer spread needs a high percentage increase to cover it;
• they tend to be highly volatile;
• they can be difficult to sell because there is a small market.
  

Buying warrants A warrant is a right (but not an obligation) to subscribe for shares, or another form of security, at a set price on or during a set future period.
They are usually issued as part of an issue of new shares, particularly by new investment trusts, but once issued they have their own market value.
Warrants are only different from call options (see above) in that they are issued by the company itself, most often by new investment trusts.
They have all the same qualities as options high gearing and therefore high volatility and a risk of losing all the investment if the underlying share never reaches the option price.
They are freely traded on the Stock Exchange.
Unit trusts specialising in warrants are available; because they invest in a number of warrants, the risk is spread and so reduced.