Why Investing in Art Is Like Playing for the NBA
Investing in art can be an asset class in a diversified investment portfolio, but only a very few artworks gain significant value over time, limiting ROI and increasing risk, writes Steve Pomeranz CFP and host of an investment program on NPR affiliates.
For the rich and the poor, investments outside of stocks are a good way to diversify your portfolio, be it with some real estate, corporate or government bonds, baseball collectibles…or even investments in art, which is what I plan to talk about today.
Economists David Chambers, Elroy Dimson, and Christophe Spaenjers developed a working paper entitled “Art Portfolios” in order to better understand the long-run performance of art as a separate class of assets. Within their study, they did not randomly look at art portfolios but studied the collection of a world-famous British economist, John Maynard Keynes.
Charles Keynes: Economist, Investor, and Art Collector
Who was Keynes? He was one of the leading economists of the early 20th-century. He was not only one of the most influential economists of his era but was instrumental in putting together the Bretton Woods agreement, which set monetary policy for the world after World War II.
In addition to being a renowned and respected economist, he was also a terrific investor—in spite of what you might think, being a great economist and great investor do not necessarily go hand in hand. According to records, in the eighteen-year period encompassing the Great Depression and World War II, the investment fund he managed for King’s College at Cambridge University grew fivefold, a remarkable performance given that the UK stock market fell fifteen percent in the same period.
Keynes’ instincts for buying art: Spot on?
His investment success carried over to his personal art collection as well.