Art as an Asset

So I flipped on the computer this morning, clicked on IE and caught the headline "Markets Poised To Open Lower." Sure enough, 30 minutes into trading, the Dow is down 100 points. It’s been a tiring trend.

I think it is pretty clear most every investor has been feeling a bit nervous over the last couple of months. Since January 1, the broad based S&P 500 is down nearly 10%. Ouch! So, if you are sick and tired of experiencing only loses in your stock picks, consider buying art instead of stocks or bonds as an asset.

The Mei Moses Fine Art Index has tracked the historical performance of art as an investment and asset class. This is not a short-term analysis either. The Mei Moses data goes as far back as 130 years.

In general, art’s relative performance is based on the historical time period under consideration. For example over the last fifty years the Mei Moses all art index has slightly underperformed stocks. It has significantly underperformed stocks for the last 25 years and has slightly outperformed stocks for the last ten years. However, art has significantly outperformed stocks over the last five years. Check out these comparative results:

 

And, for those of you who question the riskiness of buying art, take a look at this comparison to a portfolio without art:

As Mei Moses states:

The beauty and uniqueness of art as an asset class is that it gives individuals the opportunity of gaining pleasure and excitement from its ownership in three distinct ways. The first beauty of art is the obvious one of emotional appeal obtained from the visual image of the object. The second beauty of art is the enjoyment most individuals obtain from the process of its acquisition. This includes, but is not limited to, knowledge acquisition, socialization with like minded collectors and experts, excitement of the chase, meeting its maker, etc. The third beauty of art is its longevity and financial performance. Over the last three millennia there has never been a time when art was not important and appreciated. Arts financial performance, based on repeated sale auction transactions, relative to other asset classes has been good but it has higher volatility and less liquidity than most financial assets. However, its low correlation with these other assets may give it an important role to play in portfolio diversification.

As we watch the stock market traverse a very bumpy road, maybe it’s time for your investment portfolio allocation to start looking a little like this:

So… for those of you who are looking to diversify your investment portfolio, walk past your financial advisor and come into the Gallery instead. Laura and I will be happy to provide you with a meaningful piece of art that could very well outperform any one of your mutual funds. Plus, the art you buy will be something that gives you daily pleasure while hanging on your wall rather than simply being a line item on your monthly account statement.

Comments

[Barbara]

Hello, Rob:

Thanks so much for the alert about art investing and the info from Mai Moses Fine Art Index. Definitely worth exploring carefully. I gather that the data is collected from art auctions which might indicate fairly high-price art.

Best regards,

Barbara

[Rob Jones]

Hi Barbara. Yes, the art index is based on aution sales. Specifically: "The indices have been created from a proprietary database of over 10,000 purchase and sale price pairs for objects that have sold at auction more than once."

[Hamed Elbarki]

Thanks for the very information and for posting the charts.