Alternative investments gain mainstream interest, but knowledge, passion for subject help(2)
"The buyer who is not knowledgeable on wine at all may well end up with wines that have little or no real value," Lambert said.
For Dreimann, even the occasional clunker of an investment is still worth popping a cork.
"If the worst comes to worst, they get to drink it," he said.
Art
Art appreciation is taking on new meaning for a growing number of investors who, drawn by aesthetics and healthy returns, have turned paintings into portfolio mainstays. While historic returns have been about even, art has outperformed the stock market during the past decade and looks a lot better hanging on a wall than a share certificate.
Specialty funds, consultants and a widely followed tracking index have helped fuel the rise of fine art from collectible of the well-heeled to tradable asset, but it remains a pricey proposition.
Created in 2000, the Mei Moses All Art Index has amassed a proprietary database of 27,000 repeat sales at worldwide auctions to track historic valuations of investment-grade art. The average purchase price across the entire index is $120,410, with a high of $31.4 million. The median purchase price is $12,264.
"We track mature art — we're not looking at paintings that are sold on the street corner or at an art fair," said Michael Moses, a retired professor at New York University's Stern School of Business and co-creator of the All Art Index. "You might find the next Picasso there, and then again, you might not."
Like most assets, art has had its ups and downs over the years. After returning about 30 percent annually during the late '80s, the art bubble burst in 1991, with a 39 percent drop in valuations. It took until 2004 to regain the 1990 plateau, according to Moses.
The All Art Index tumbled in lockstep with the economy during the recession, losing 23.5 percent in 2009. Last year, the index recovered with an increase of 16.6 percent, topping the S&P 500 total return, which grew about 15 percent. Through June, the art index has increased 6.2 percent, continuing its modest advantage over the S&P 500 total return, which was up 6 percent.
While any artwork can appreciate, it takes a track record to quantify returns, making most art-fair purchases highly speculative, said Rachel Edelshteyn, founder of The Board of Investment Art, a 4-year-old, Chicago-based consulting group.
"If you're not spending $5,000, it's probably not an investment," she said.
For even bigger budgets, the London-based Fine Art Fund Group, a 10-year-old art investment house with $100 million under management and 25 percent annual returns on sold assets, offers a fine art fund and an array of geographic specialty funds focusing on Chinese, Indian and Middle Eastern art. The minimum investment ranges from $100,000 to $250,000.
Despite the lofty prices, interest in art as an investment has never been higher, according to Moses.
"It certainly seems, from the size of the auction market, that art is attracting interest from a broad range of individuals," Moses said. "Right now I think it's the broadest range in history, with buyers from around the world."
Financial gains aside, Moses said the appeal of fine art remains far more intrinsic for most buyers.
"I still think the vast majority of art that's being acquired is for people who love the beauty of it and love the fun of collecting it," he said.
