The Nervous Investor

Even though luxury investment trends can show the way, you don’t have to follow trends in order to invest well for the long-term.

How much should we trust our instinct when it comes to investment? Most experts will tell us the answer is—not a lot. Warren Buffett, considered to be the world’s most successful investor, has often given out good advice that sometimes sounds like downright common sense—‘It is far better to buy a wonderful company at a fair price than a fair company at a wonderful price.’

The wisdom here being that it is the quality that’s important and only after we have assessed the true quality can we evaluate the price. So, Oscar Wilde was right when he said a cynic was someone ‘who knows the price of everything and the value of nothing’.

But understanding the true value of a picture, a case of fine wine, a precious watch, or a classic car is anything but straight forward because in these matters, if we are collectors, our heads are often ruled by our hearts—which is ok as long as you have a strategy.

Following the trends, however, just as a shareholder follows the stockmarket trends, is not only fascinating but it is also essential for serious investors who want to be sure they don’t take a hit. But even in the latter case when the worst happens, experts recommend that it is better to hold your nerve and hold out rather than cut your losses because, in the long term, significant recoveries frequently happen, bucking the trend.

Tracking these luxury-market trends on an annual basis is the London firm Knight Frank, who publish annually The Wealth Report. The Report informs us that classic cars of the rarest kind continue to out-perform all other ‘collectible’ assets, with art coming down in fourth place after coins (third), and fine wine (second).

So, classic cars are the current top tip for investors. Although no classic car sale has managed to beat the record set by Bonhams in 2014 when they auctioned a 1962 Ferrari 250 GTO Berlinetta for $38m, eight of the 25 cars ever to have sold for over $10m at auction were made very recently, in 2015. These record hammer prices included all-time high results for Jaguar ($13.2m), Porsche ($10.1m) and, interestingly because of its youth, McLaren ($13.75m).

However, even assets not currently noted for their investment potential, such as coloured diamonds, there are remarkable exceptions for big investors playing the long game. Take the Hong Kong-based billionaire who set an all-time record for a gem or piece of jewellery when he bid $48.4m for the Blue Moon, a rare fancy vivid blue diamond auctioned by Sotheby’s Geneva in November. The previous day he had bid $28.5m for a vivid pink diamond sold by Christie’s.

Wine also had a good year with the Knight Frank Fine Wine Icons Index up five percent. Many of the investment-grade Bordeaux wines have now started to recover from the slump induced by the sharp drop in Chinese demand, says Nick Martin of Wine Owners, which compiles the index.

In the art world, major contemporary and modern artists performed particularly strongly last year, with Picasso’s Women of Algiers setting an all-time auction high of $179m at Christie’s sale in May. Many other artists, including Modigliani ($170m) and Twombly ($70.5m), also scored personal bests.

More recently, Christie’s have been reminding us that we don’t have to be millionaires to invest in art. Their First Open | London and First Open | Online sales (April) are flagged as ‘the perfect environment for new contemporary art collectors to test the waters’.

And Christie’s encourage new collectors to embrace technology more than ever. ‘There’s a much more open feeling among younger artists and collectors,’ says Bianca Chu, Head of Sale for First Open in London. ‘It’s easier to gain access and understanding about contemporary artists thanks to social media platforms and the way we use imagery today has affected the way we collect art.’

Unique in its broad international coverage of both arts and cultural events, Arts & Collections covers fine art from antiquity to modern times, auction records, a special sale preview by Sotheby’s, as well as market trends that inform collectors of the world’s finest items.

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