How is art is an investment?
The value of an artwork depends on various factors. Just like a value of stocks or bond increase or decrease with market forces, the art market works in the same way. The artwork of an artist becomes more valuable with the artist’s popularity and the medium of art. This change in value makes art act as an investment.
What are the risks involved?
The art market functions like every other market and has its ups and downs. The uniqueness of every piece in the market makes this a more risky investment than others. It is not very easy to gauge the increase or decrease because there is no straight-jacket formula but there are still certain tricks that can be employed.
What kind of an asset is art?
Art is an illiquid asset. This puts art in the same category as real estate. This just means that it cannot be converted into liquid assets as easily as stocks or bonds can. This is a very important factor to consider when investing in it.
Why you should invest in art?
Art investment is a good idea if you are looking for a long term investment. It takes a while for artwork to earn considerable money and you should be willing to maintain the artwork for that entire time. You should also research the market and the various factors involved to understand the mechanics of the art market.
Most art collectors and investors add art to their portfolio more for the love of art than the economics of the matter. The aesthetic and emotional pleasure one derives from art is incomparable to what any traditional economic asset could provide.
What you should look for in an art investment?
It is very important for any investor to understand where art derives its value from. It is important to nail down what exactly you are looking for. The artworld is indeed very big and in order to narrow down the search, you should pick a genre or time period that interests you. You should then look at what kind of work you are looking for with those requirements. This piece could be an original, reproduction or prints. A large part of this decision depends on what you like and how much you are willing to spend on it.
Originality: You must make sure that art is of the same style as the other works of the artists. There are a lot of hawks out there waiting to prey on you and things like a certificate of authenticity can be your best buddy.
Artist Background: The background of the artist greatly influences the value of work. Their previous works and where they trained is very important to research. It is also pertinent to make sure that your artist’s work is an original and that he has the credibility to be a good investment.
Outside opinions: Don’t be shy to ask for help. Art is something that can be very risky so you should look for a third person’s opinion without being swayed by your emotions.
Your collection: You shouldn’t ruin the aesthetic value of your collection just for the sake of a good investment. You need to enjoy your collection and be passionate about it in order to realise its true value.
What are the types of art you can invest in?
Art can be classified into different classes. Certain pieces of art will be safer than others. While some are extremely speculative in nature. They are almost like stocks and bonds. They can be classified into old classics, Blue Chip Pieces, Contemporary pieces and art funds.
Works of Old Masters or the Classics
These refer to pieces from the renaissance period which is around the 18th century. They are old but the most valuable. Leonardo da Vinci is a perfect example of a classic. The works from these artists are up to 500 years old. They are the rarest and most precious pieces of art in the world.
Blue Chip Pieces
Blue Chip art pieces are those that come from culturally relevant artists like Andy Warhol and Pablo Picasso. They usually sell for over $10,000 a piece.
These are the artworks that start of small and go a long run. They are from lesser-known artists and hence come for a really small price. This is a very risky investment and expertise is required. Here investors need to see what the experts have completely missed and to do that you need to be better than an expert.
These are the safest bets for all new investors who know nothing about art but are interested. If you are nervous about how to go about investing in art this could be a perfect option for you.
Privately-managed art funds curated by art investors are the perfect opportunity to invest without spending too much on research.
Where you should look for art?
Art can be found anywhere from online to old museums. It is important to pin down what sort of investment you are looking for. Auction houses, galleries, museums are especially important places to look for art if you are looking for a big investment.
Is art a good investment?
That question can’t be answered by anyone but you. You need to realise what your personal goals are. If you are looking to make a lot of money in very less then art is not necessarily your calling. Art is a risky business and hence passion is very important. For seasoned investors, art is great because they know how to diversify their portfolio and they have the time and money to do so.