Things to consider before doing Art Investment

 

Ever considered investing in Art? We generally assume that only the rich can buy art, but that’s no longer true. Check out our article, Why Buy Art. 

The last few years have witnessed a serious boom in the art investment market. It’s gotten a few heads turned, to say the least. One of the reasons people are looking at art as investments is that art increases in value over time. Unlike stocks and bonds, the market for art investment behaves differently compared to the regular financial market. However, there are few things one must consider before investing in art.

 

The value algorithm 

Despite art increasing in value over time, the value of the artwork and the rate of increase in value is highly dependent on the success of the artist. The more successful an artist becomes, the more the value of his work increases, straight and simple. However on the off chance, you have bought an artwork, and the artist doesn’t become successful or discontinued his artistic career (Oh it happens!), then the value of the artwork either remains the same or more likely decreases. 

But because the value is so highly dependent on the artist himself, there is no way of assessing the true value of the artwork. 

For example, four years ago, a painting believed to be Leonardo Da Vinci’s work sold for a record price of $450 Million. But 60 years ago, the very same painting was said to be a painting by one of Leonardo’s followers, and thus sold at an auction for a mere $60. 

The relationship

Investing in Art is like a long-term relationship, only suitable for patient investors. As it is so highly dependent on the career success of the artist, a normal lock-in period for any artwork is 10 years or more. 

It’s almost like watching a child grow. 

This is probably why many investors build assets in art to be passed down to their descendants. 

The portfolio

Despite art being popular in the investment community, for most well-rounded portfolios, art only takes a small fraction of the entire portfolio. This is also because, while investing in art the most common advice is to only invest as much as you are willing to lose. Despite the continuous increase in value, the possibility of large payouts from art itself is still too low. According to Artprice, on average, Art returns 7.6% to the investor per year. Take a look at our article, What Does Art Mean For Your Investment Portfolio?

No guarantees

There are also no guarantees that the price you paid for the artwork will automatically increase in the next few years. Many believe that prices of artworks will immediately skyrocket upon the demise of the artist, as the artist can no longer create more, therefore creating a scarcity of his work. 

So how can we avoid all these pitfalls? 

Educate yourself

The single best chance for you to achieve success with investing Art is to educate yourself. Reading up on art practices, Art history books as well as visiting museums and galleries are the best resources one should utilise in the best possible way, especially when considering to invest in art. 

The Golden egg

Lastly, but also most importantly, be sure to invest in a professional appraisal before you buy an artwork. This would help you eliminate as many risks as possible that come with investing in art. 

Additionally, be sure to get your artwork/s insured, especially your high value ones! 

As daunting as some of the pointers may sound, they are important ones to keep in mind. Investing in Art is serious business, we are here to get you prepared! 

 

If you want to know, even more, check our more detailed guide on how to buy art for yourself and for your office. We are always here to help you to find the right artwork, you can book an appointment with us, and remember, enjoy yourself while in the process!

 

 

 

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