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Frame and fortune: the fine art of making a profitable investment
EVEN 18 months ago, investing in property looked as safe as, well, houses. The same went for stocks and shares which have, after all, made some people very rich. But this was before the well-documented financial crisis brought the banking system to its knees and sent the world's markets tumbling.
Now, all of a sudden, many investors who fear their savings could disappear into thin air are looking at moving their money into something more tangible. But where do you start?
In times of uncertainty, people usually turn to such safe havens as gold and diamonds. And history seems to be repeating itself with bullion dealers reporting a big surge in business.
Gold, though, isn't the only thing in demand and many people with spare cash are turning to art and antiques as alternative long-term investments, rather than risking the ebb and flow of stocks and bonds.
Tim Corfield is co-founder of Corfield Morris, a firm of antiques and fine art advisers. He believes the property market nosedive has forced people to look elsewhere. "In the last 10 years, just about everybody who had spare money to invest looked to invest in property. But with the state of the buy-to-let market going downhill that's changing.
"People are looking for alternatives and antiques are a sensible option because, unlike most other things, they haven't boomed in the last five to 10 years which means they should be a shrewd investment."
Prices for traditional furniture "the type that you see on the Antiques Roadshow", have remained low, he says. "Antiques have been out of fashion because interiors magazines have been all about minimalist design, but we're starting to see a reaction against that and there's a good chance it's going to take off."
But he warns any would-be antiques investors to make sure they're not being ripped off. "The important thing is to make sure whatever you're buying is authentic, so if you're buying some George III chest of drawers, check that they haven't been over-restored."
Andrew Hartley, who runs Hartleys auctioneers and valuers, based at Ilkley, in West Yorkshire, says they deal with everything from antique furniture to specialist toys. "There are some great bargains, but it's not a short-term punt, it's not like stocks and shares that you buy and sell quickly, it's a long-term investment."
If antique toys and furniture aren't your bag, then how about wine? If you're like me, the temptation to drink the profits would probably prove too great, in which case you're better off looking for liquid assets of a different kind. But Adam Lechmere, editor of decanter.com, says for those willing to treat it as a serious investment there is money to be made.
"To invest in fine wine, you have to spend a lot of money in the first place, so ordinary mortals like you and me probably won't make much money from investing in wine."
Despite the emergence of new world wines and the existence of renowned producers in Italy and California, France, and in particular, Bordeaux, is still top of the pops when it comes to fine wine. "If you are going to invest seriously in wine then it's got to be France," says Lechmere.
Fine wine shows annual returns of around 12 per cent, although some bottles bring in much more. A case of Chateau Pichon-Lalande, from 2005, or Chateau Lynch-Bages, from 2000, will have doubled in value on today's market. A case of 1982 Chateau Ptrus bought the following
year would have cost around 300 and is now reportedly
worth 32,000.
Wine, of course, will at some point start to lose its value which puts some people off. Art, on the other hand, is often seen as a more dependable investment. Philip Hoffman, chief executive of the Fine Art Fund, an international investment firm, says it generates an average return of around 30 per cent for each picture it sells. "Art is a long-term investment, it's not something where you make a quick buck," he says. "The value of a Canaletto will never go down to zero, it will never do an Enron or a Marconi."
He points out, too, that the contemporary art market is more volatile than that of the Old Masters like Rubens and Velazquez.
This is supported by the latest RICS UK Arts and Antiques survey which shows that the super rich are snapping up high end works as they seek investments safe from the clutches of the financial storm. It comes just a month after the Damien Hirst sale at Sotheby's which generated a staggering 111m – the record for a sale devoted to a single artist.
However, for every Damien Hirst or Banksy there are thousands of artists who promise much only to disappear into obscurity, making it difficult to predict the next superstars from the also-rans.
But although the art world can be a notoriously fickle business Yorkshire artist Ashley Jackson insists that art can be a very
good investment.
"Some of my older paintings which cost the equivalent of just 75 pence have fetched as much as six grand on the second-hand market. My paintings go up by about eight per cent each year which is better than what you'll get with a bank."
But he offers a word of caution to would-be investors. "You've got to know the history of the work, you can't just go into a gallery and pay 5,000 for a painting, because it may only be worth the price of the frame when you come to sell it.
"My tip for anyone looking to invest in art would be to find out if the artist has a re-saleable value, because if they haven't then don't buy their work."
Wealth creation expert Nicola Cairncross, who runs The Money Gym, believes the key to being successful is understanding how the markets work, not what you invest in.
"We encourage our clients to invest in things that increase in value and put money in their pockets, whereas art and wine don't cover their own costs unless you can rent them out. So you only get your money back by selling the goose that lays the golden egg," she says.
"Making money is very simple, but it isn't easy, you need to take action and push yourself to learn the expertise you need. The most important alternative investment you can make is to invest in yourself so you know what to do when the market changes.
"If you can't buy a property because the banks aren't lending then you find another way of doing it, for instance, you can buy under the rent-now-buy-later scheme."
Perhaps the best advice is: whatever you invest in, do your research and don't put all your financial eggs in one basket.
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Friday 10 February 2012
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