Art Collector

Art Can Be a Smart Addition to a Diversified Investment Portfolio

Diversify Your Investment Portfolio with Art Assets

With the return on traditional investment assets, such as savings accounts, bonds, and securities tanking, several alternative investments like wines, luxury automobiles, and art have emerged as smarter investment strategies. Art investments seem particularly attractive, especially in light of recent reports of £37B in global sales according to the European Fine Art Foundation. This tops the record £35B seen in 2007. Last spring, a French Post-Impressionist piece by Paul Gaugiun fetched close to $300M, the highest price ever recorded for a piece of art. All of this may entice you to run out and start your own art investment career, and while this could be a very successful move, it pays to be cautious and conduct a very thorough and realistic assessment of the market. Some numbers may be inflated and some of the recent investment returns may be short-lived. In fact, if you ask around, there are mixed reviews and conflicting advice. Therefore, patience and homework are key tools to building a successful art investment portfolio.

Invest or Don’t Invest

Most financial planners steer clients away from art, preferring to keep them in more liquid assets, something you can sell when you need to. While your art collection may bring you a good price, if what you own is not hot in the market right now, you will have to wait for a buyer. The volatility of the market is very much tied to the condition of the economic environment, which artists are popular, what technique or medium is trending, and a host of other factors that could slow down your ability to turn around some cash. These factors also impact the growth of your investment. Furthermore, art is not regulated, as are other assets, so as an investor you cannot rely on any compensation or protection should something go wrong. As a final note, financial planners will tell you that there are significant upfront costs involved in purchasing your art, beyond the sticker price, such as appraisal fees, insurance, transaction fees, perhaps storage and delivery, and resale fees. Nevertheless, art is a very good asset to include in a diversified investment portfolio. If you are investing for the long-term, and you like art, then it makes perfect sense. Analysts at JP Morgan say that art investments perform particularly well during periods of high inflation. Of course, there are always those special gems, such as Garguin, that buck all the trends and predictions. Buy what you can afford, art that you love, and be prepared for the possibility that you might hold on to it for longer than you anticipated. As long as it brings you pleasure and you are under no pressure to liquidate assets, investing in art can be a wise decision.

Ready to Jump In?

You can be an art investor without personally purchasing works of art. You can join a consortium of art fund investors. Or, if you are ready to start your own collection, explore the many online art fairs and auction houses. According to some private banks, the best art investment is currently in Chinese art, which has almost doubled in value since 2008, out-performing all other fine art. If Chinese art appeals to you, it is well worth it to add some pieces to your investment collection, or join a Chinese art investment fund.
Art Can Be a Smart Addition to a Diversified Investment Portfolio
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Art Can Be a Smart Addition to a Diversified Investment Portfolio
Is now the time to add art assets to your investment portfolio? Art could be a benefit to your long-term investment strategy. What are the benefits and risks?
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Sharone Perlstein
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