William Kay: Don't be deceived, art is much riskier than stocks

One of my grown-up sons came to see me over the Easter weekend. He'd read a magazine article about a couple who had invested so much money in art they didn't have enough room to show it on their walls.

"The stock market's flat," my son said, "and interest rates are low. Art looks a pretty good bet."

As the bear market has gone on, gradually the wine, art and other exotic investment promoters have emerged. In my view their silky talk is dangerous.

Sure, the works of Damien Hirst and Bridget Riley have rocketed in value. But would you buy them at today's inflated prices and still expect to make a profit? The trick, as in all investment is to spot the next winner, and that is much harder than looking at how well past winners have done.

By all means, I told my son, if you see something you like for a few hundred or even a few thousand pounds, snap it up and hang it on the wall. Enjoy it, and if in 10 years you sell it at a profit you have gained twice over. If you have to sell at a loss, at least you've had the pleasure of looking at it and no great financial harm has been done.

But don't put a serious slice of your wealth into art, wine or antiques unless you are an expert. Prices aren't quoted daily in the newspapers, so you have to keep your ear to the ground to know which artist's works are taking off in value, or peaking.

Don't hang what is in effect your pension or Isa money on that wall and forget about it. You will need to cash in that sort of investment at some stage, maybe 20 or 30 years hence. You could be in for a pleasant surprise or a nasty shock.

That can happen with more conventional investments. But, over a long span, a widely diversified stock market portfolio is far less likely to disappoint than today's promising young artists.

* It will come as a disappointment to thousands of package holiday customers that the Office of Fair Trading (OFT) has come down in favour of the big tour operators over the fraught topic of cancellation charges. While some travellers do cancel on frivolous grounds, most give up on what is often their big holiday of the year only in the direst and most unavoidable circumstances. To have to then surrender part or all of the cost of the holiday adds insult to what may literally be injury.

But if an operator has laid out money in advance of the holiday and may itself be unable to recoup hotel booking fees, then it is only reasonable that it should be able to ask the ultimate consumer to bear those losses, particularly as it is sensible practice to take out travel insurance which covers cancellation.

The question is how much is fair. And the OFT has concluded that the income generated from cancellation charges does not appear disproportionate to the overall losses the operators have incurred from cancelled holidays and flights. The OFT examined the charges imposed by Airtours, First Choice, Thomas Cook and Thomson Holidays between late 1998 and early 2001.

But it seems the presence of a watchdog growling at their heels did help to concentrate minds. In 1999, First Choice and Airtours both made a 100 per cent charge for cancellation within 21 days of departure. First Choice now charges 100 per cent only within three days of departure, and Airtours does so only on the day of departure. Maybe the OFT should call on them more often.

w.kay@independent.co.uk

William Kay is personal finance editor of 'The Independent'