Did you just fall in love with the masterpiece you saw at the recent exhibition?
The detail and finish of that art piece must have caught your eye immediately. Besides art fans, many investors also fall in love with art. While they observe the delicacy of a painting, they also look for its financial aspects. Investors may pick a beautiful art piece as an investment.
Though, did you know that art is not always a safe investment!
Art and art forms evolve. Apart from a few timeless pieces, art goes out of fashion like clothes or hairstyles. Yet, it does not stop investors from purchasing them.
Investing in fine arts can be excellent to expand your portfolio. It shows that you are willing to invest in high-profile businesses and not scared to take risks.
Plus, you may brighten your place with the art piece as originals never go old.
The most important aspect of being an art investor is to understand the difference between an original and a copy. You might buy a copy for a million dollars, and it will be too late when you know.
Is it reasonable to invest in art? That’s uncertainty.
But, here’s what you should consider before investing in art.
Investing in arts is not the same as stock. It does not multiply overnight giving you massive returns immediately. While the possibility of it happening is not quite high in stocks either, it is close to zero in arts. When you plan to invest in art as an investment, make sure you have enough to forget about that piece for at least 10 years. Experts say it takes 10 years or more to estimate if your art piece will profit you or the demand will fall. Thus, it is not the best choice if you cannot hold on to the art piece for a long time.
Art is Non-Liquid
Investors typically put their money into liquid assets like stocks or savings that can give them immediate cash in case of need. However, art is not a liquid asset. It is non-liquid or illiquid like real estate. It may not sell immediately when needed, thus not very sustainable.
New investors often think they can invest in art if someone around them has the slightest knowledge. Yet, considering the huge sum involved, you do not want to invest when the risk ratio is more than the benefit. Always research on your own about the artist, their artwork, its popularity, and the estimated reach of the art piece in the future. It may take some time to understand the intricacies, but you can start with a few basics like:
- How many galleries have displayed their artwork?
- Do people vouch for its authenticity?
- Have they gained recognition for their work?
- Do people appreciate their work?
You can get this information from the displaying gallery, or social media is your best friend!
Compare Returns over Long Term
As mentioned earlier, art is a long-term investment, and you cannot expect high returns in less time. Thus, it is significant to understand the art piece’s worth in the best 10 years. It usually depends on the economy and reputation of the artist in the coming years. Still, thorough research about the artist will enable you to make a rational decision about investing in the product or not.
Ignore the Hype
You might feel that this contradicts the research. But, it does not.
The return on investment is not based on how popular the artist is today. Instead, it relies on what people think of them and their work in the next decade. Do not fall for the momentous hype. Invest in art pieces based on their quality, not recent trends. Look for a bigger picture when you invest in a non-liquid asset.
Contacts are important for any business. They help you get a better deal and good-quality products. So is with art. Establishing relationships with artists, gallery owners, and art critics will help improve your knowledge about the business. Getting in touch with other art investors or advisors from the Art Dealers Association of America is even better.
Buy what you Like
You might think that you are not the best critic to judge the right investment choices. But, we would say you must believe in your intuition besides research. Do not buy any art piece without proper research. Though, you may choose one of the two which you like better.
The Bottom Line
Art is a non-liquid asset, yet it may prove to be beneficial after a decade or so. You can buy an original, print, or reproduction per your budget. However, reproductions and prints may not give significant profit compared to originals. Ignore the hype, compare returns over time, establish contacts, research, and buy the one that seems most appropriate.
Matthew is a Co-Founder at BusinessFinanceArticles.org. Matthew was a floor manager at a local restaurant in Wales. He lost his job after the pandemic and took initiative to make a team and start the project.