Why Invest in Art?

Fine art is as old as man – and possibly even predates man, as evidence emerges of Neanderthals making cave art fifty thousand years ago. Besides creating art, humans have always collected art, whether it was the legendary treasures of Tutankhamun, King Croesus of Lydia, Emperor Wu of Han or the Medici bankers of medieval Florence.

The rich have always surrounded themselves with masterpieces of art – and not only for their physical appeal. There are two main reasons for owning fine art. The first is a love of beautiful things. The second is the fact that the majority of artworks increase in value over time, making them an excellent capital investment.

Long before the appearance of shares or bonds, Europeans knew that investing in art was a profitable and secure way to hold onto their capital. For centuries, old families remained wealthy by traditionally keeping one third of their capital in land, one third in gold and one third in art.

This remains true to this day. Over time, fine art always outlasts and outperforms such riskier assets as stocks, bonds and cash. Art has no credit risk, currency risk, maturity risk or any other kind of risk. It can never go bankrupt. Even if the stock market collapses, you will still be able to enjoy a painting or a sculpture. Your art will probably outlive you.

Besides acting as a good capital investment, collecting art offers you an important psychological boost. Objects of great value and beauty not only provide aesthetic pleasure, but also demonstrate to others your high status, fine taste, good education and financial solidity. They say that the rich buy property, while the super-rich buy art.

Recently, less than 2% of the world’s wealthiest individuals collected fine art. But the good news is that buying art as a capital investment is now making a comeback. Following the 2008 crisis, financiers are increasingly seeking new and alternative investments outside stocks, bonds and cash.

One such alternative is buying fine art – although, as we have seen, it is difficult to call collecting a new type of investment. In every other period in human history, wealthy people have known that investing in fine art is not only a fascinating and absorbing pastime – it is also the best way to retain and multiply your personal wealth.

OK, we have seen the reasons for investing in art... but why invest in Russian art?

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