Art investing Versus the Stock Market
Art investing can be a lucrative and successful business venture. However, many people that spend much of their time and money in the financial stock and bond market may find the transition to art investing difficult. The two are not synonymous, but can be conducted simultaneously as long as the investor understands how the two are alike and different at the same time.
Anyone can see that there are obvious differences between priceless works of art and shares in a multinational oil conglomerate. Art is a tangible object which offers many people more peace-of-mind than securities, stocks and bonds. If the bottom falls out of the stock market, the money may be lost forever. A painting may diminish in value, but unless it is physically destroyed, it is probable the value will go back up.
Although there are advantages to being able to see and touch your investment, art investing is much less liquid than investments made on Wallstreet. In art investing, buying and selling is not as simple as pushing a button or calling your broker. You may own a Van Gough painting that appraises at $35 million dollars, but that doesn't mean that there is a buyer waiting in the wings. It may take a while to sell items from your collection for what they are worth.
The art investing market is similar in nature to the stock market in that there are ups and downs due to certain economic and environmental factors. However, the art investing market is not directly tied to the stock market and the two have a surprisingly low correlation. This has a lot to do with the reason most art is purchased. Art investing is not usually done simply to turn a profit. Purchasers do so to own a valuable work of art and often the bragging rights to go with it.
The majority of people that will purchase a masterpiece by a well know artist are appreciative of the work. They simply admire the piece and want to add it to their collection and show their friends at dinner parties. These are often people of means, they have made their money elsewhere and can afford to spend a great deal of money art investing. Unlike stocks and bonds, art investing is not often done as simply a means to turn a profit. The selling of artwork is often done because the owner wants a new piece for their wall.
Financial investments such as stocks and bonds have become endeavors that even the most inexperienced investor can attempt. However, there have been few attempts over recent years to establish art investing as a popular venture. This is surprising to some, given that the return on investment is remarkably close. In the past fifty years, has shown an average annual return of 10.9%. Similarly, art investing has returned an average of 10.5% per year. This combined with the knowledge that you are helping to preserve great works of art would appear to attract more investors than it does.
Mutual art investing funds in the past have turned a profit for their investors, some over 11% annually. Even Merrill Lynch made an attempt at launching an art investing fund that wealthy people could buy into. However, lack of interest grounded this before it had much of a chance to take off. This is more evidence that art investing is simply not an avenue many choose to pursue.
A financial advisor will never recommend that you choose art investing as your sole investment. However, most would agree that diversification is the basis of a great portfolio, and that art investing is a good diversifier. The art market fluctuates at different times and rates as the financial stock market. By combining art investing with your other investments, you can help protect your financial future and add a little culture to your investment portfolio.