Crisis Investing 101: Get Ultimate Diversification With Art, Wine and Collectibles

As I've been saying in the past articles of this series, diversification can take different forms. Depending on the size of your portfolio and personal interest, diversification can lead into unusual and exciting profit opportunities.

 

You can diversify with anything that will potentially appreciate in value. There is no need to stick to the traditional exchange-traded products. In fact, use out-of-the-box thinking with truly uncorrelated investments, and you will build the ultimate crisis portfolio.

And a popular, uncorrelated way to add that extra layer of diversified safety onto your crisis portfolio is collecting art. Purchasing art, wine and collectables can also be a great hobby that may open up new worlds for you, the investor.

Here's a closer look at art as one of the most popular alternative investments...

According to the index Art Market Research's Art 100, the median price for art has soared 1,066% since 1975 and is up nearly 30% in the past year. Huge numbers have been paid, such as more than $106 million for a Pablo Picasso painting, $90 million for a Chinese Qianlong vase and nearly $11 million for a rare edition of John James Audubon's "Birds of America." Not only are art collectors paying attention; financial people are as well.

As a result, art funds have popped up. With an art fund, an investment manager pools money from investors to purchase paintings. In return, the investors receive ownership units in the artwork, with value tied to the underlying art. The leading art fund is The Fine Art Fund, with more than $150 million in assets. The fund is divided into subfunds: old masters, impressionists, modern and contemporary art. It requires a minimum initial investment of $250,000, but it claims an average annual return of 20%.
And although art funds provide investors with professional guidance for choosing and pricing artwork, it's possible to invest in art independently.

Here are four tips for investing in art... (more)

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