With bank accounts offering paltry interest rates, alternative investments seem a more attractive, some offering staggering interest rates and potential. The latest exotic investment being offered is to invest in Graphene. What is it, and should you join the rush?
Graphene is carbon. That’s it. It sounds exotic, it’s ‘new’ (well, it’s as old as fire, and was under our noses all this time), but it is just carbon like charcoal and diamond. Graphene is a single atom-thick lattice of carbon atoms, strongly bonded and very thin. Why is everyone excited by it? It has unique and fascinating physical properties which we are yet to explore. What does it do? Nobody really knows yet – and that’s why investing in it is a huge risk.
Why could it be a good thing? Well, you might back the winning horse. Because nobody knows what graphene is good for yet, it’s possible you could be supporting important research which will revolutionise the world. Perhaps it’ll have medical benefits, perhaps you’ll develop new solar capture technologies, or shrink microchips? You could change the world.
Why could this be a bad investment? Being so new, all research and development is at an early stage and very expensive. If you invest in a research company that discovers a novel and valuable application you may benefit from a slice of the patent pool. If they come in second, after someone else’s patents, you lose. This really is gold prospecting but in tiny soot particles where you have next to no control. More investments will lose than win.
Sexy alternative investments like graphene may also be hyped by unregulated investment companies – it’s easy to pluck big numbers from thin air. Some currently claim the graphene market is growing by 50%+ each year, however that is not the same as 50%+ returns on investment. Seeing as graphene itself is common in regular household soot, the raw materials are of negligible cost and value, so only by finding unique and patentable applications can you make any money.
Some companies have claims about inserting themselves uniquely into the graphene supply chain, they may provide flashy brochures full of high-tech stock images but be short on details. When you’re investing, details count. Just consider how essential any company might be in procuring the basic essential materials when your own body is approaching 20% carbon by weight. Who’s going to pay a premium to return your investment when they can source cheaply around the world?
If you have money to speculate in the emerging technologies markets, then do proper research. Many companies soliciting investment are unregulated and are deliberately targeting small, unsophisticated investors. They take commissions on investments, and not provide impartial financial advice. They can make wild claims and vanish leaving you without any comeback.
Many exotic investments (graphene, bamboo, hotel rooms, land banks, perpetual motion machines, etc) are full of hype but of little substance. Frequently they’re structured as Ponzi schemes where early investors get returns from the investments of later investors. Because they’re getting returns they encourage their friends to invest, and so forth until the investor pool dries up – then the company shows that the cupboard was bare, as Madoff investors discovered recently.
If you get excited by new technologies, do your research. If you don’t understand what’s being offered, there’s probably a reason for that – and it may be that it doesn’t stand up to scrutiny. Only ever take investment advice from an independent financial advisor and invest in reputable companies, not middle-man startups who chase fad investment schemes promising you gold and giving you…soot.