The art of investment

Art, wines and cars present a great investment opportunity

There are many people who love to collect things—some collect stamps, while others collect wines, some others collect art. While most people do it out of passion, there is a growing number of people who are collecting such rare items for their financial gains. Yes, collector’s items have a great investment value to them and if you know what to collect, you can make a neat profit out of it.

While you can invest in anything that catches your fancy, the current favourites are art, wines, coins, stamps and vintage cars.

Art

ArtThe top on the list and one that has attracted numerous collectors and investors for centuries is art. The practice of investment in art is quite common around the world. In recent times, many Indians too are foraying into this market.

Why invest in art…

  • The art market is an insulated one, which means that fluctuations in economy, interest rates, inflation, the share market have very little effect on art prices, making it relatively stable.
  • Art will always have value and if chosen correctly, will appreciate with time. In worst case scenario, you can hold on to the paintings, which will give you visual pleasure as well as retain its original price.

How to go about it…

Start with visiting art galleries, exhibitions and auctions. Art worlds have their publications [you’ll find them at an exhibition or a gallery] and websites. Hob-nobbing with fellow art connoisseurs helps you gain important insights into the art world. The artists are present at the exhibitions. Make sure you interact with them to understand what inspired them and hear them talk more about their paintings.

It is not necessary to buy works of only famous artists on order to reap good benefits. At times, it makes more sense to invest in budding artists as you may get their paintings at a cheaper price and if the artist goes on to be successful, the prices of your paintings will soar to astronomical heights.

To decide which painting you should invest in, the most important thing is to like the painting. Unlike other investments, these should offer you visual appeal or else they can become a thorn in the eye.

Once you set your heart on a painting, do a background check about the artist’s profile and his previous works.

Gather opinions of others from the art world about the particular painter—this can definitely earmark your returns.

Consult an art advisor, who too, can be found by word of mouth or through frequent visits to galleries, exhibitions and auctions. Seek their advice before you make an investment since investing in art is not a small deal.

When to sell…

Unlike other investments, art is not a place to make quick money. Also, in case the price doesn’t appreciate, you need to hold on to the investment, sometimes even for decades. There are no fixed returns, but at times, international art index has given returns as high as 30 per cent. On an average, a good investment can earn between 7 – 13 per cent.

To sell, you can talk to an art dealer or a gallery or an auction house.

Wine

Wine bottleInvesting in wines is different than collecting wines for consumption. Also, investing in Indian wine is not an option.

Why invest in wine…

  • The wine industry or the global market for fine wine is expected to grow at 3 billion dollars, annually.
  • In the year 2010, London based Liv-ex Fine Wine 100 index rose by over 26 per cent. The year before, it grew by 31 per cent. This index represents the price movement of 100 of the most sought- after fine wines.

How to go about it…

The quality of wines and its pricing depends on climate, soil, the age of wines, genetics of wines and most importantly, the skill of the wine maker. Soil and genetics are not changeable factors but with the passing of years, as the wine ages, the quality of the wine ‘may’ improve. Remember, not all wines improve with age. As a particular wine ages, it may also become scarce thereby, appreciating in value.

As a wine investor, you have to look for international wines, wineries and wine funds for lucrative returns. International fine wines like Chateau Lafite Rothschild and Chateau Mouton Rothschild are some names you can consider. The Chateau Lafite Rothschild 2000 vintage has risen more than five times over last five years. And Chateau Mouton Rothschild 1982 vintage has risen by a whopping 173 per cent in the same period. Certain vineyards and regions in Europe are recognised as being historic in determining the quality and return price of the wine.

Indian investors can approach Indian wine advisory companies, which will help you with the know-how and also hold and preserve the wines on your behalf—once you invest in wines, they have to be stored in a particular surrounding and at a particular temperature or else the wine may lose its flavour and you can bid you investment, adieu.

One can also invest in wine futures, which means wine which has not been bottled and is still in barrels. Given the demand for fine wines, your chances of getting higher prices are better when you invest earlier. International wine investment portfolio invests 80 – 90 per cent of their value in just eight brands or vineyards. Five of the best fine wines are from Bordeaux in France. The restricted supply makes them rare and expensive.

When to sell…

Beware that the risk involved is high. Investment in wines is for individuals who know and understand wines and just like other off-beat asset classes, liquidity of investment can be an issue. The best time to sell each wine will vary and selling is easier through a wine broker or wine societies.

Antiques

The rules for investing in antiques are similar to those for art. Before you take the plunge, a deep understanding of the subject is required.

Why invest in antiques…

  • While other investments stay put in the bank, you can use antiques to adorn your home while you own them.

How to go about it…

Begin with scouting exhibitions, galleries, auctions and the internet. Gain as much information as possible before you invest. Buy from a reputed dealer who will be able to provide all authentic information about the item. Whenever possible, get a certificate to validate the authenticity of the item. These asset classes require huge investments and may remain with you for a few decades, so always go with an item that appeals to you.

Study the era from which the item belongs, find out its rarity and how many number of pieces were produced. Check its historic significance [if any]. Finally, take the opinion of an antique expert. Antiques can range from furniture to jewellery and silver coins to curios.

When to sell…

It is difficult to judge the return on antiques but the cost of selling antiques is high, almost 30 per cent or more. The longer you hold, the higher you will gain on selling. Antiques can be sold back to galleries or through auctions.

Vintage cars

Vintage CarCars have always been viewed as a symbol of aristocracy. And there is nothing like vintage cars to give you that feeling of royalty. The moment you lay eyes on a well-maintained vintage car, you are transfixed by its beauty.

Why invest in vintage cars…

  • They are a fortune on wheels. In the year 2011, the classic car segment performed better than equities and even gold. Some segment of classic car rose by 20 per cent in 2011.
  • On an average, a return of 12 percent over a period of 30 years has been recorded by Historic Automobile Group International [HAGI] which measures returns of 50 classic cars.

How to go about it…

One way of investing in classic cars is to buy an old car, restore it and then resell it. The investment here is higher, though the returns are good. Of course, you’ll have to confirm that the car you’re thinking about is recognised as a classic. Investing in vintage cars of the makes of Ferrari and Porsche makes sense as they fetch value when you plan to sell them. Also do not forget that buying cars involves high maintenance costs, which will affect your profitability and depreciation.

When to sell…

The time to sell a collectors item like a vintage car is best decided by its owner. You’ll have to first prepare yourself to part with your item. Make sure you have the documents of the vehicle in order and approach dealers and car clubs to help you sell you car.

Choose what you like

There are many others items that catch the fancy of investors looking to merge investments and excitement—antique single malt whiskey, rare stamps, rare movie posters, comic books and cards of base ball players…the list goes on.

All the above investments come with a risk. Do an exhaustive research before investing as along with risk, the amount involved is huge. Also, remember

  • Invest only 10 – 15 per cent of your portfolio in it.
  • Treat your investments with care and preserve them to gain high returns.
  • Always buy an item that you love and not only because it is recommended by a dealer because you may have to be stuck with it for a long time.

This article was first published in the August 2012 issue of Complete Wellbeing.

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