Alternative Assets: Art

Art collecting has been around for centuries, long before the inception of the stock market. This form of alternative asset has the potential to generate enormous gains and has been shown to perform well even when other financial sectors are struggling. However, this form of investment can be incredibly risky. There are many factors that affect the value of a piece of artwork but unlike with investing in companies it can be much harder to accurately predict market trends or how the value of an individual piece will appreciate over time. Still, with a university education in art or history and prudent decisions, it is possible to do very well by investing in artwork.

Art collecting was once considered to be an option only for the very rich. It is true that the initial capital investment to buy a painting, sculpture or statue can be large. Still astronomical returns can be realized if the correct pieces are purchased. Barbara and Eugene Schwartz, for example, purchased a small painting in 1981 for $3150 and sold it in 2008 for $14.6 million. Such returns are next to impossible in more traditional investment arenas like the stock market. Still for every such story, there are hundreds of others where a painting gained little to no value. This makes it vitally necessary to chose paintings or sculptures that have the most potential to increase in value. A university education can be helpful in making these decisions. Still, the art market has performed exceptionally well over the past decade even when other financial markets were floundering making it a promising alternative asset.

Another consideration to make when investing in art is the costs involved with storing and maintaining an art piece. Certain paintings will need to be stored in a climate-controlled space and large statues may be expensive to transport. Additionally, because it is important to buy insurance for all art investments as they can be easily stolen or destroyed in a fire.

Art investments are a very exciting alternative asset to pursue. Not only do these pieces have the potential to create enormous profit, but many investors find sentimental value in the pieces themselves. Art paintings are very beautiful and displaying them in one’s home can provide many non-financial benefits in addition to profit potential. Still, the risks involved with this form of alternative asset should not be taken lightly. It is very important to obtain a university education specializing in art and to properly research each piece before it is bought to ensure a prudent purchase.