Can art enrich your portfolio?

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Can art enrich your portfolio?

A Bonhams auction house employee poses for pictures with an artwork from Andy Warhol's dollar sign series (1982) during a photocall at the auction house in central London, on November 25, 2011. The signed print is one of two from the dollar sign series, which are expected to fetch collectively in the region of GBP 15,000-20,000 (approx 17,500-23,340 euros/23,2300-31,000USD) at Bonhams' Print Sale on November 29, 2011 in London. AFP PHOTO/CARL COURT (Photo credit should read CARL COURT/AFP/Getty Images)

Just because you don’t know the difference between Monet and Manet or between modern and postmodern doesn’t mean you should shirk the idea of investing in art, if you have an interest or a passion for beautiful works.

“Art can be a suitable alternative for the right investor,” agrees Richard Cayne of Meyer International. “As long as you don’t expect to discover the next $100 million Picasso in your collection or think that silk painting you bought at that local market is a priceless lost artefact.”

Art collecting may seem exotic to some, but most of us do collect art on one level or another. Why not look into making a hobby or passion into a money-maker?

Understanding the risks is key

Beyond the uncertainties in the art market, there are other issues that you should understand.

Authenticity is an absolute must, so you need to make sure you’re buying from a reputable source with the proper documentation. Also, there’s no regulatory body or fall back scheme to cushion your losses if you cannot find a buyer when you choose to sell. And, in most cases, art investments will only produce income from a sale. There are no dividends or rental income like with securities or property.

Make sure you know what additional costs are involved. Dealers and brokers will charge transaction fees well beyond what you’re probably used to, and, unless you are well-versed in the field or want to rely on more than your own preferences, you may want to solicit the advice of an expert, which will not be free.

Depending on your purchase, you may want to display it, which may require a special set-up if you want to protect your artwork from damage. If it’s purely an investment, you’ll need to consider storage options. Either way, you’ll also probably want to insure your items.

Art is more than paintings by long-famous artists

Don’t let the news about Picassos and Warhols making millions on millions at Sotheby’s or Christie’s distract you. If you like more contemporary works or appreciate local artists, have a second look. Read up on who’s been getting attention. And there’s always the chance that an artist or period may see a revival in interest. But this can be risky. No one is sporting a penny-farthing lately (if you don’t know what that means, that sort of proves the point).

And don’t think that only paintings are the only medium that makes for a worthwhile investment. Consider the fine and decorative arts. Sculptures, vases, bronzeware, jewellery, the list is endless. And then you can add your regional preferences: Chinese porcelains, Persian handwoven carpets, Indian beaded tapestries are just some of the types of pieces that have seen appreciation both in interest and in monetary value.

Is all this worth it?

This may seem like it’s all more trouble than it’s worth, and if that’s the case, then investing in art may not be for you. But if you are already collecting pieces, whether to support an artist or cause or just for the sheer pleasure of appreciating art, you may want to explore how to hone your selection process.

“There is nothing wrong with considering your art collection as part of your portfolio. But, you need to be realistic about what kind of returns you should expect, if any,” claims Richard. “If this is an area you want to pursue, you can also look at art funds or pooling with group or at how to get better informed regarding up and coming artists or trends.”

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