Investing in art it is indeed a great idea if it’s something that you truly love. But it can be risky, in the sense of choosing the right art work from the right artist. So you need to do your research before proceeding. Art can do more than brighten a living space. The art market has become one of the hottest new investment crazes in recent years. Painting and sculpture collectors frequently buy pieces with an eye towards adding to their investment portfolio. But will art investment really earn you a profit? Or is this new asset class mostly hype?
Lets analyze it..
How do art investments work?
Art is a long term investment. Profits from art won’t come overnight. Experts recommend art as an investment only for patient investors with a time window of 6 years or more, so think long term. Many art investors include paintings in their estate planning as assets to pass on to their descendants. The art market follows rules of its own. One very important benefit of art as an asset is that its value doesn’t rise or decline according stock market. Even if your stocks aren’t performing well, your art investment may be doing great. These are the good news for a savvy investor who wants to diversify a portfolio and minimize risk. And furthermore, most of the times, art will continue increasing its value over time.
Art is risky though sometimes. It all depends on choosing carefully the right emerging artist. Follow his work, his sales, marketing, exhibitions, population and how these things increase over the year. Every artwork is unique, and the art market has ups and downs just like any other market. Since it’s impossible to determine an artwork’s true value—a lot depends on the artist’s reputation and on the economy as a whole—you should be comfortable assuming some risk. But be sure that the risk you take on Art investment is the least harming one for your portfolio.
How to invest in Art
Start by deciding how much money you’re prepared to spend. Don’t forget to take into consideration possible storage and maintenance costs. Then learn as much as you can about the art world. Visit local galleries and see what they have to offer. Discuss with curators, who will usually be eager to answer any of your questions and advise you accordingly. If you live in or near a city, you are probably close to gallery openings and art fairs, where emerging artists tend to exhibit their pieces.
Browse Art platform sites and online auction houses like Sotheby’s to get a sense of how the market works.
Once an Art piece or artist catches your eye, you can start your research to see how much the particular artwork costs. Make sure you compare the prices of the particular artist with previous years. That way you will get a feel of his/her upcoming progression throughout the years. The app Magnus provides up-to-date pricing information for potential investors – take a photo of the artwork and they’ll tell you the details. But the safer step is to get the artwork appraised by a professional appraiser to determine its quality.
You can either purchase an artwork yourself by a gallery or through internet. Since this is the information age, plenty of high-end artwork sells online. When buying, always ask for the Authenticity Certificate from the artist.
What to know before investing in Art.
Like stocks and bonds, art can increase in value. If an upcoming artist goes on to a successful career, the cash value of their work will skyrocket. An Art Basel annual report estimates global art market sales reached over $67 billion in 2018!
But you should know that Art is non-liquid. It’s important to remember art is a non-liquid or illiquid asset. This means it’s difficult to convert into cash right away. Needs time in order to convert art into cash properly and profitably. Liquid assets, like stocks, bonds, and savings accounts, can produce cash more easily. Illiquid assets, like real estate and art, take much longer to sell even if they have great monetary value. So you have to be patient. Any hesitate decision might lead to deductions of the value of your Art piece. Though it’s possible to sell your art, most investors don’t. An auction house, one of your options of selling, often charges hefty fees. The best way to do it, but needs time, is to go through an art dealer or a gallery. Usually the purchase and sell, happens through Art dealers and other private collectors. A procedure that guarantees your cash back on the exact value of your Art and with discretion.
When should you invest in Art?
Here are some signs that might worth you invest in Art.
You Enjoy Art
Most art investors start out as collectors. If you love going to galleries and you’re already on the lookout for a great piece to add to your home, turn that appreciation into an asset! But if you don’t like art for its own sake, other investment options will serve you better. You don’t have to be a collector to start investing in art. You can keep your investments to just one or two pieces. But knowledge of the art world or working with someone who has this knowledge is the key if you want to pick the art winners.
Earnings will be great but art is far more than earnings.
Consider the aesthetic pleasure first and the financial benefits second. First the art piece should talk to your heart and mind. Welcome any profits, but don’t plan your financial future around receiving those profits.
You have to be willing to make your research.
That said, art investors can pick pieces with great long-term value. But you should be informed just as you would be if you invested in the stock market. Start by researching the artist of the work you’re considering. Ask the following questions: Are their pieces included in any museums or famous collections? Have they won awards or gained other recognition for their work? While emerging artists can be exciting, their reputations may or may not last. And this will affect the value of their piece. So you should make sure that the artist you choose is following an upcoming course in their career. And do not underestimate the advice of your Art dealer/curator.
You can afford the maintenance
Art investors get to control their assets, which can be a bonus. But remember that you are responsible for keeping the artwork in excellent condition, which means monitoring factors like humidity and sunlight. If you display your artwork in an exhibition you will have to make sure it maintains its original quality. If you put it in storage you will have to for that as well. Add insurance costs and the price of an authenticity certificate, and your maintenance bill adds up.
What to look for when buying Art
The art world is broad, so in order to narrow down your search, you should pick a category of artist, Emerging/Established or old masters and the type of art that interests you. Then find an expert to help you look. I strongly recommend working with an art advisor during this procedure. It’s important to have someone that will help and advice you when it comes to determine the fair market value of an art piece, making sure you get your money’s worth and choose the right artist.
Once you’ve found your area of focus, know what kind of piece you’re buying.
- Originals or one-of-a-kind works of art come with the highest price but the greatest potential payoff.
- Prints or copies are more affordable but less likely to turn a profit. The best quality print is known as a giclée (zhee-klay). It’s similar to the original work than other prints, but also more expensive. As a rule, rarer prints are more valuable. One print from a small number of limited editions will have more value than a print with many copies floating around.
- Reproductions are mass-produced copies without a limited run. They’re the most affordable option, but they are also worth the least. You probably won’t see any profit from a reproduction.
Where to look for Art
Galleries, Art Dealers and Art fairs of course, are great options. Research any galleries beforehand to learn as much as you can. Another option is Auction houses where you can bid on art but in a more intense environment. However you can score a masterpiece if you’re lucky. Be aware auction houses often charge a buyer’s premium in addition to the sticker price. You should always check there the hidden charges.
In conclusion with an eye for art and a willingness to take a minor risk, a new or experienced investor can find art investment incredibly rewarding. Though it should only be part of your overall portfolio, art can round out other investments nicely.