Instability in the financial markets is encouraging investors to look for alternative methods of investment. Some of the most popular alternative investments are art, stamps, gold, other commodities, wine, toys and books.
Of these, NRI favourites have to be art, fine wine and gold. We discuss these investments in detail:
Investing in Art
Art is being incorporated into the investor’s overall asset allocation decision. There are many ways of investing in art via auctions, online auctions, art gallery and online portals. A few things an investor must look into:
* Art buyers should gain as much knowledge as possible of the artist’s work, the quality, provenance, condition and period in which it was painted before investing.
* Have a clear idea about the time horizon and gestation period for a particular work to appreciate in value.
* If an investor is looking for quick returns, he must buy works of well-known artists. If you like a less famous artist’s work and are prepared to wait, your returns might grow majorly over a period of time.
* Buy art only if you like the quality of work and not just the artist. Art requires careful maintenance.
Investing in art is a good method for diversification. Since art prices do not depend on other possible components of a portfolio, they act as a cushion when other markets are not doing well. The aesthetic pleasure of viewing a great piece of art is a great advantage.
Art works hardly depreciate in value hence proving to be a less risky investment. On the other hand, art prices are known to appreciate over a period of time and this is very advantageous.
Like all other investments, investing in art also has its downsides. Not anyone can invest in art. It requires a certain level of knowledge and expertise. The fact that they depend largely on public tastes and other factors, make them a fairly speculative investment.
Also art cannot be resold quickly for a profit. It also needs high level of maintenance, storage, security, and it doesn’t give dividends, bonuses or income.
(For more personal finance stories, you can also visitwww.bankbazaar.com)
Advantages and risks of investing in Art
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