Have you recently checked the attic to see if you have any paintings by famous Old Masters hidden away there? Or do you scour flea markets in the hope that you will find a famous painting that no one knew about? Such stories are usually the stuff of novels or news articles, but in real life there are people who buy works of art for the purposes of investment. The idea is to sell them at a higher price than they were purchased, making a handsome profit.
On the Goldstein on Gelt show, I recently interviewed Amy Goldrich, an attorney with Lynn & Cahill in New York who specializes in dealing with the art world. I asked Goldrich if art is a reasonable investment and why people might choose to make money this way.
“Art doesn’t behave like other assets,” Goldrich told me. “It’s hard to peg value. It’s incredibly illiquid, very difficult to sell, and has a high selling cost.”
These disadvantages may discourage most folks from thinking about investing in art. But, as Goldrich stresses, “You need to be smart about it.” If you are considering art as an investment, you need to take the following into account:
* Do you like the piece of art that you bought? If you can’t sell it, then at least you should be able to enjoy it!
* Don’t throw everything that you have into buying a single painting. Again, what if you can’t sell it?
* Do your homework. Not every so-called art dealer out there is bona fide, experienced, or competent.
* Where did the piece of art come from? Who are you dealing with? Due diligence is extremely important when purchasing a piece of artwork.
If liquidity is important to you, then probably investing in art is not the right move for you. However, for some people, depending on their time frame and entire asset allocation model, investing in a non-monetary asset might be appropriate.
If you would like to find out more about investing in art, listen to it on Goldstein on Gelt Investing and Fine Art Amy Goldrich. (The opinions expressed on the Goldstein on Gelt show are those of the guest, and not necessarily my opinions or the opinion of Portfolio Resources Groups, Inc.)
Douglas Goldstein, CFP®, is the Director of Profile Investment Service, Ltd., which specializes in helping people who live in Israel with their US dollar assets and American investment and retirement accounts. He helps olim meet their financial goals through asset allocation, financial planning, and using money managers.
Published October 1, 2012.