art is a bad investment

i always like studies done by companies that have a vested interest in the conclusions. merrill lynch declares art is a poor investment, lagging stocks and bonds. of course, one could argue that stocks and bonds are just as risky, especially if merrill lynch is involved, but that is part of another story. my gut tells me they might be right on this though.

While stocks or bonds are almost certain to make investors a profit over five years, art has a high chance of declining in value, the world’s biggest brokerage company said. The probability of losses on small-cap stocks, corporate bonds and long-term treasury bonds is 3 percent or less if they’re held for five years. Art investors have a 17 percent chance of losing money over five years, Merrill said.

Soaring prices for art stirred interest from banks and dealers in 2004, when about 12 art funds seeking to raise as much as $150 million were planned. Only one or two, including London’s Fine Art Fund, ever got off the ground. Merrill’s investment strategy report, dated July 17, helps to explain why.

“Art, gold and commodities offered the least attractive risk-reward potential, providing inferior returns while generating substantially more risk,” Merrill said. The three asset classes “may be more appropriate investments for those who have truly long-term horizons,” it said.






2 responses to “art is a bad investment”

  1. Zeke Avatar


    If you consider investing for a five year term, a good strategy for investment, then I am certain that ML is right. However if you invest with a five year horizon you better know what you’re doing and have nerves of steel.

    Even the S&P500 hasn’t returned to where is was in 2000. But you aren’t going to hear anyone suggest that the S&P500 is a bad investment.

  2. eric Avatar

    zeke, that’s a very good point. but i think that the vast majority of art is not what i would consider “investment grade”, and the average person’s chances of making money as an investor/collector are not very good.

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