Alternative Investment Tools

Some view investing in art, diamonds, and coins as a frivolous expanse since these collections aren’t easily convertible into cash, while others see it as a prime opportunity for portfolio diversification. Let’s see who is right.

The key principle of success is diversifying your investment portfolio. It’s not just a strategic imperative but a lifestyle for professional investors. It involves not only assessing and readjusting but also seeking out fresh opportunities to mitigate risk within the portfolio. This is where alternative investment avenues come into play.

Art Pieces: Paintings Valued at One Million Dollars

One of the most alluring alternative investment assets is art. Paintings, sculptures, and antique pieces serve as interior decorations and offer a stable income source for investors, making them a sound investment choice. Take, for instance, Steven A. Cohen, a prominent businessman and owner of the New York Mets baseball team. He is also renowned for his art collection, which is valued at $1 billion. Initially drawn to the Impressionist movement, Cohen broadened his interests over time. Today, his collection includes works not only by world-renowned artists like Monet and Manet but also by prominent artists of the 20th and 21st centuries, including Andy Warhol, Jackson Pollock, and Peter Doig.

Examples

Let’s look into the instances of lucrative investments in art:

• A prime illustration of a successful investment is Pablo Picasso’s Les Femmes d’Alger (version O), acquired in 1997 for $31 million and subsequently sold at auction in 2015 for a jaw-dropping $179.4 million.

Contrary to popular belief, not all renowned paintings come with exorbitant price tags. However, you need a blend of luck and expertise to acquire them.

• Consider the case of a family possessing a neglected, dimly lit painting hanging in their kitchen, much to the disdain of the owner’s sons. Inherited from relatives who acquired it for a meager sum during the Great Depression, the painting went unnoticed until after the owner’s passing. Believed to be a 19th-century piece, it was sold to a collector who later discovered it to be an early work by Rembrandt. Later, the painting fetched $1 million at auction, eventually landing in the French gallery for $4 million. While this example ended in disappointment, another tale unfolds.
• In 1992, a woman stumbled upon an unusual painting at a pawn shop, purchasing it for a mere $5 as a gift for a friend. Realizing the canvas didn’t suit her friend’s taste, she attempted to sell it at a flea market. Fortune smiled upon her when a buyer suggested the painting might be Jackson Pollock’s creation. Unfamiliar with Pollock, she reconsidered selling the painting. Later appraised at $50 million, the canvas remains in her possession to this day.

That being said, don’t rush into buying every painting you come across in flea markets or pawn shops—understanding art is key. This also holds true for the works of young artists or sculptors. Think back to the memorable scene from the movie “The Untouchables,” where a regular Joe, flabbergasted by the sky-high prices of “daubs,” paints his own, only for his employer to sell it for a fortune. So, if you’re eager to venture into art investment, seek out an advisor who can help you do it the right way.

Jewelry

For generations, including jewelry in investment portfolios has been a go-to approach for many investors.

Examples

• An example of a successful investment lies in the story of the La Peregrina necklace. Originally crafted to showcase the renowned La Peregrina pearl, Richard Burton’s purchase of the pearl for Elizabeth Taylor in 1969 amounted to $37,000. Fast forward to 2011, when Christie’s New York auctioned off a Cartier necklace featuring La Peregrina for a staggering $11.8 million.
• Faberge eggs also fall within the realm of jewelry. One particularly intriguing story revolves around a pawnshop owner who acquired a golden egg for $13,000, thereby rescuing it from imminent melting. Upon closer inspection, he realized it was an authentic Faberge creation. He later sold it for a whopping $33 million.

That said, one critical factor must be considered: jewelry with a rich history tends to appreciate in value. A ring bought from a standard jewelry store may depreciate in value over time. However, jewelry with a storied past and unique gemstones tend to increase in value over time.

Diamonds and Other Gemstones

Investing in diamonds and other precious stones is also considered a promising endeavor. In addition to their aesthetic value, stones have high liquidity and demand in the market. The global gemstone market is expected to grow 6.53% by 2029 to $53.2 billion, up from $30.1 billion in 2022, according to Exactitude Consultancy.

Numismatics

The allure of coin collecting, particularly when it comes to rare and historically significant pieces, is undeniable. These treasures, steeped in history, have the power to yield substantial profits for their fortunate owners.

Examples

• A 1933 $20 Double Eagle gold coin was sold for an astounding $18.9 million at auction. 

What’s intriguing is that some of these rare coins can unexpectedly surface in everyday places like wallets or as change received during transactions.

• For instance, a 2007 dollar coin with a missing or double inscription could be worth up to $3,000. Similarly, a 2003 25 kopecks coin might fetch its owner up to 800 hryvnia. 

It’s fascinating how alternative investment opportunities can range from multi-million dollar acquisitions to modest finds worth just a few dollars.

• Gain a thorough understanding of your investments to avoid overlooking a Rembrandt masterpiece or settling for a mediocre artist.
• For art pieces, coins, stamps, and jewelry to truly hold exclusive value, checking their history is essential. In the art world, knowledge of history equates to financial gain.
• If you’re considering investing in art, gemstones, or similar assets, seeking advice from a reputable expert early on would be a good idea. This person should have authority and a solid reputation in their field.

Artworks and collections carry a certain prestige, elevating your reputation and garnering admiration from others. While traditional investments like stocks or gold may showcase your financial gut feeling, paintings, and collections showcase your discerning taste and meticulous attention to detail.

If you’re curious about investing in alternative financial instruments, don’t hesitate to reach out. I have a network of excellent experts who can offer valuable insights and guidance. And if you’re intrigued by the world of numismatics, I’d love to exchange thoughts and ideas—I’ve been growing my own collection for over a decade and have plenty of knowledge to share with a “colleague.”