Shipping investments are a form of
alternative investment
An alternative investment, also known as an alternative asset or alternative investment fund (AIF), is an investment in any Asset classes, asset class excluding capital stocks, Bond (finance), bonds, and cash.
The term is a relatively loose ...
into an asset related to worldwide
shipping
Freight transport, also referred to as freight forwarding, is the physical process of transporting commodities and merchandise goods and cargo. The term shipping originally referred to transport by sea but in American English, it has been ...
. This could be into ships themselves, or a related asset such as
shipping container
A shipping container is a container with strength suitable to withstand shipment, storage, and handling. Shipping containers range from large reusable steel boxes used for intermodal shipments to the ubiquitous corrugated box design, corrugated b ...
, with the expectation of capital appreciation,
dividends
A dividend is a distribution of profits by a corporation to its shareholders, after which the stock exchange decreases the price of the stock by the dividend to remove volatility. The market has no control over the stock price on open on the ex ...
, and/or interest earnings.
History
Shipping investment has a long history and led to development to stock exchanges and insurance. In the 1600s Dutch ships would travel to the
East Indies
The East Indies (or simply the Indies) is a term used in historical narratives of the Age of Discovery. The ''Indies'' broadly referred to various lands in Eastern world, the East or the Eastern Hemisphere, particularly the islands and mainl ...
for spices and other goods. These voyages were risky and so Captains would seek investors to share the risk for a percentage of the profit on return. This was an early investments in shipping by those investors. Eventually, shipping companies formed such as the
Dutch East India Company
The United East India Company ( ; VOC ), commonly known as the Dutch East India Company, was a chartered company, chartered trading company and one of the first joint-stock companies in the world. Established on 20 March 1602 by the States Ge ...
to help spread the risk and increase profits.
Characteristics
Some of the characteristics of shipping investments may include:
* Low correlation with traditional financial investments such as stocks and bonds
* Considered to be a relatively liquid investment as there is a second-hand market for shipping assets
* Considered to be a cyclical industry, with long supply and demand cycles since ships are large physical assets that take time to build, transport and dispose of
* Costs of purchase and sale may be moderately high
* There may be limited risk and return data
Ship ownership
Investment in ships involves purchasing or leasing new or second-hand vessels and either operating them directly or chartering them to other operators. Investors seek either profits generated from shipping fees, capital appreciation of the vessels themselves, or both. Due to the high capital commitments involved, ship investment has tended to be limited to ultra high net worth individuals and syndicates.
In the
UK, investments in cargo ships can qualify for the
Enterprise Investment Scheme, making it possible for individual investors to access ship ownership as an asset class.
Shipping containers
Investment in shipping containers involves purchasing a container and having an external company manage and lease the containers to merchants. Investors are often promised high rates of return based on purportedly growing demand from cargo ships preferring to lease containers instead of buying them. The
Freightos Baltic Index is an example of an index that is published daily showing the global container
freight rates.
The industry is known to have been targeted by
scams, particularly in the form of
Ponzi schemes.
See also
*
Alternative investment
An alternative investment, also known as an alternative asset or alternative investment fund (AIF), is an investment in any Asset classes, asset class excluding capital stocks, Bond (finance), bonds, and cash.
The term is a relatively loose ...
*
Gold as an investment
Of all the precious metals, gold is the most popular as an investment. Investors generally buy gold as a way of diversifying risk, especially through the use of futures contracts and derivatives. The gold market is subject to speculation and ...
*
Shipping markets
The international shipping industry can be divided into four closely related shipping markets, each trading in a different commodity: the freight market, the sale and purchase market, the newbuilding market and the demolition market. These four m ...
*
Traditional investments
In finance, the notion of traditional investments refers to putting money into well-known assets (such as Bond (finance), bonds, cash, real estate, and equity shares) with the expectation of capital appreciation, dividends, and interest earnings. ...
References
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Investment