Owning art and collectibles as part of your overall portfolio of investments can be a wonderful way to diversify your holdings beyond the typical stocks and bonds. However, you would be wise to enter into this type of ownership with an awareness of the pros and cons. Here are some to consider if you are thinking of investing in this way.
Pro: Increase your portfolio diversity
Having art and collectibles can be a great way to keep a healthy mix within your investment portfolio. Such investing offers the chance for you to delve into areas of art (including painting, sculpture, or even installation art) and collectibles (including rare stamps, rare items with historical or cultural significance, or coins), make targeted investments in what interests or excites you, and add to the overall well-rounded financial portrait of your investments.
Pro: Purchase for the passion
Buying art or collectibles presents a unique opportunity to purchase something for your own (or your family’s) personal passion. You can choose to purchase pieces by an artist that you’ve followed for a long time or that has significance to your family’s story. Few other investments offer an opportunity to do so.
In addition to the potential for increased value should you choose to resell an item later on (though this increase in value is never guaranteed), you can indulge in what interests you within the expansive art and collectible spectrum while also acquiring something that may have longer term financial value for you, your family, or your heirs.
Pro: Owning an heirloom
Once you have chosen to purchase a piece of art or valued collectible from an auction house, trusted art dealer, or other outlet, you have the advantage of owning something that is heirloom quality and that can be treasured, shared, and passed down to future generations. Though this doesn’t have a tangible financial value, the meaning and warmth that comes from a beloved painting, sculpture, or coin collection can bring another layer of meaning for you beyond a mere dollar value.
Con: The fluctuating market
When buying a piece of art or a collectible, it is important to know that the level of financial liquidity is different from other holdings in your portfolio. That’s why it’s important to speak to your financial advisor before making any significant purchases.
Unlike something like a corporate stock that can be sold relatively easily within a few days, a piece of art or a collectible is more subject to the variable whims of the market for a particular piece, and the perceived value of a specific artist, genre of collectible, or other classification. Given that, it is important to enter into this type of collecting with an awareness that you may be buying (and holding onto) a piece for a longer term than a simple stock, bond, or other financial product.
Con: Potential for counterfeits
There is also a potential for counterfeit products, including forgeries, falsely aged or weathered documents, or other fakes to make their way into the market and perhaps even into your collection. Before purchasing any piece of art or collectible, you would be wise to have it vetted, examined, and authenticated by a trusted source, whether an auction house, independent appraiser, or other well-educated and certified resource. By staying vigilant to the counterfeit issue, you can ensure your collectible or artwork is authentic and as valued as you believe it to be.
Collect wisely and with intentionality
No matter what you choose to collect, it’s wise to acquire assets that make sense for your financial goals. You can purchase art and collectibles that meet your specific needs, whether you want items with personal meaning, ones that will diversify your portfolio, or assets you can pass on for generations to come as part of your legacy.