OF COLLECTING ASIAN CERAMICS:
as an Investment
It is reasonable to say that people are more open minded today
about non-traditional investments than in the past. Stocks and bonds
will always be important but continuing regular financial crises have resulted in the belief that paper investments are not as secure or as stable as
we all thought they should be.
are today diversifying more of their net worth into
hard assets with tangible value. Examples include such
physical goods as gold, gems, real estate and oil tankers that can
act as a hedge against disruptive financial markets. Art is
one particularly interesting example of such as an asset.
While stocks can pay
dividends if companies earn profits, they can also collapse to nothing if the company goes broke. Hard assets like diamonds and Chinese vases dont provide an income stream but they also dont go bankrupt.
And, while their prices might deflate from time to time, you and
your friends can still enjoy them anytime.
is an Asset?
The key difference that separates
art from virtually all other investment assets is the subtle quality
we will call prestige. For people in positions of leadership in
our society, owning works of art can be a powerful but understated way of demonstrating a commitment to human achievement that transcends time.
Such displays have been improving peoples success in
their dealings with others since the dawn of civilization and some would say that much of the worlds great art
work has been created with this in mind. As an owner of art, the collector takes on the very real responsibility
as a keeper and protector of a part of human culture and accomplishment, and it is not to be taken lightly.
It is this enduring quality that elevates art far above more profane assets acquired purely for profit.
Government bonds, growth stocks and limited partnerships -- important as they are -- seem mundane, and even crass, by comparison.
Can I Actually Make Money from Art?
Various studies have shown conclusively that art provides similar returns to equities
over the long term. One of the most often quoted studies
by professors of the Stern School of Business in New York University showed returns within 0.5% of the S&P 500. Art is a more risky investment (as measured by the variability of returns) but it has consistently outperformed bonds and gold.
And, its returns are often negatively correlated to financial
investments -- it is good for diversification, in other words.
Being a long-term investment, art seems suitable for long-term investors like pension funds and life-insurance companies. One of
many examples of success was the British Rail Pension Fund that invested 40m in 2,400 works of art beginning in the mid-1970`s. The collection was gradually liquidated by the
1990's and yielded an average annual return of 13% -- respectable by any measure.
Asian Ceramic Art