For new art collectors to compare the significance of investing in art, I decided to show a comparison of return on investment if one had invested in a blue chip company and the value today if one had invested in an art piece.
‘Standard Oil’ was the largest multinational company that has ever existed, the value of ‘Standard Oil’ in 1911 taking into consideration inflation adjusted figures, would make Microsoft look like a small family operated business. Standard Oil was foundered by the legendary tycoon John Davison Rockefeller whose inflation adjusted value would have been over $1 trillion, which is quite a tidy sum if you take into consideration that the Forbes top 500 billionaires combined value is $1,2 trillion.
‘Standard Oil’ during its pinnacle controlled 25% of the worlds oil supply and was heavily invested in oil pipelines, rail roads, real estate and controlled the petroleum jelly (Vaseline) market.
One of the worlds most famous artist is Pierre Auguste Renoir. Renoir paintings are know for their impressionist style, and are some of the most sought after paintings by discerning art collectors. Renoir paintings are know to break new records each time they happen to be on the market which is quite rare. If one was lucky enough to be around in the 1800′s, one might have been lucky to have purchased a Renoir for a song.
During that time Renoir and his friends Claude Monet, Alfred Sisley and Frederic Bazille were always short of money. One of Renoir’s most famous paintings is ‘BAL DU MOULIN DE LA GALETTE’, which was painted in 1876 and is currently valued at $131 600 000-00.
The question one would ask, would I be better off today if I had invested in ‘Standard OIL’ shares in 1870 or had bought the ‘BAL DU MOULIN DE LA GALETTE in 1876 for a few dollars. The answer is quite simple ‘STANDARD OIL’ doesn’t exist today, it ceased operating in 1911, while Renoir painting the ‘BAL DU MOULIN DE LA GALETTE valued at $131 600 000-00 can be viewed at the Musee d’orsay in Paris.
Another case-study is one of British rail pension fund. In the 1970′s the British rail pension fund invested 2,9% of their portfolio in art, earning a return of 40% PA above inflation up to 1999.
So is art an investment? Do the maths and let the figures do the talking?
Michael
November 24, 2011
I have written a couple articles about art as an investment, and i have received feed-back from people comparing the return of investment of art with that of other investment options.
For starters i have always stated that art is an long-term investment and those who interested in short-term high risk investment returns then gambling would be a better option. One has to understand that art is an passion investment, when one buys an art-piece one should should not think of an immediate return, instead on should focus on satisfying their soul.
Art is about taste and preference ,either you like it or you don’t, other peoples views should’t influence you when you decide to purchase an art-piece. Its said that ‘Beauty is in the eyes of the beholder’.
What makes art an investment is that historically ark-works appreciate in value over time, beating all other short-term investment options. One can take a cue from Warren Buffets investment principles.
Warren Buffet only invests in want he likes and understands. When he invests in anything he is not looking at short-term returns but long-term and that the reason why he is regarded as the worlds greatest investor. For one to appreciate art as an investment, one should has to first appreciate the art and most importantly take a long-term view.
In other words buy your art-piece and showcase it in your home or office and enjoy the beauty and splendor of the art piece. Over time when the art-piece has appreciated in value and you are in need of funds you can use the art-piece as collateral and borrow against it instead of disposing the art-piece.
The beauty of art is that its an investment that can be passed down from generations to generations. One should ask themselves how many share certificates from say 1900s are still worth the value of the paper that they are printed on, while comparing the value of art-works from the same period.
One must ask themselves why extremely wealthy people invest heavily in art collections, the answer is to retain their wealth.