The Top-Performing Alternative Investments: Truffles and Tea
White truffles and the finest green teas attract bidders willing to splurge big for epicurean trophies.
How It Works: Putting fine foods up for auction generates the biggest returns. Truffles, the most expensive mushroom on earth, have auctioned for as much as $330,000. By comparison, seven-tenths of an ounce of 2006 Da Hong Pao, an ancient strain of Chinese tea, recently sold for upwards of $30,000.
You can grow truffles, either on your own or by buying a share of a truffle grove. You can also find them in the wild and at farmers' markets. From there, it's possible to earn returns by selling the truffles to chefs or retailers at a marked-up price.
Find valuable teas through wholesalers, markets or by ordering online. Some teas appreciate with age, making them good for a buy-and-hold strategy.
Who's Investing and Why They're So Good at It: With truffles, either you're lucky enough to mine a gem or you have a niche. In the US, where truffle cultivation is taking off, Charles LeFevre of New World Truffieres does well providing seedlings and consultations to North American truffle farmers.
The Chinese president could be the ultimate investor of Da Hong Pao tea, which has only been auctioned to the public three times. The people with the discernment to uncover other valuable teas are often retailers. Sun Sing Tea Company's Kings Yeung, for example, finds and sells top-grade puerh in Hong Kong.
What They're Making: Two-thirds of an ounce of top-grade Da Hong Pao went for about $23,000 in 2002; seven-tenths of an ounce sold for $30,000 four years later. Lower grades have been rumored to sell for $30,000 per kilogram. Prices for some strains have increased 1,000% during the past year.
Truffles command even higher prices. Casino magnate Stanley Ho bought a 3.3-pound white truffle for $330,000 at a charity auction in 2007. Alba white truffles generally go for $3,000 per pound wholesale. Black Perigords sell for at least $1,000. If you own trees, you can ideally profit by about $130 per kilogram, with each tree producing 10 kilograms during its lifetime.
Why They Really Do It: Foodies and tea lovers can't stay away from delectable collectibles anyway. Investing is the logical next step.
How to Get Started: Buy a "hot" tea from a reputable buyer, or do your research and try to nab the next big tea. Believe it or not, tea futures may hit the market in the next couple of years. You can buy and hold a tea that appreciates with age, like puerh.
Because those $330,000 white truffles are few and far between, play your odds. Investment companies sell shares of global truffiere groves, trees whose roots have been injected with truffle spores. Front start-up money, wait five to 10 years for the trees to produce, and cash in when your truffles sell. As with tea, homework is essential. Check out organizations like the North American Truffling Society.
Growing them yourself or selling spore-injected seedlings stock are other options. Or mine farmers' markets and farms for truffles to sell to chefs or retailers.
Amateurs Be Warned: During times of high demand, cheap imitations flood the tea market. Even if you have the real stuff, returns may be high now, but watch out!
Poor weather can make for a bad truffle season. Only heavy, high-quality truffles are venerated; avoid lesser specimens. Also note that truffles are hard to cultivate. Even in spore-inoculated trees, truffles might never appear. In France and Italy, watch for poachers.
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