Forbes recently posted an interesting article on investing in fine art. The article briefly looks at the growth and amount of sales in the fine art market and also some basics of understanding for buying and investing in fine art.
The article looks at fine art investment 101, does investing in art payoff, tips for the beginner art investor, and is it the right alternative investment.
I found this paragraph toward the end of the article a positive for art advisory professionals, which certainly should include appraisers "To make money investing in art, you have to nail the basics. Treat your art purchases like alternative investments. As if you were purchasing stock or other securities, buy and sell high-value artwork through a reputable advisor who can facilitate research, bidding and maintenance."
Forbes reports
Source: ForbesInvesting in an artwork can feel more like a dice roll than an investment. Recently, painting and sculpture collectors have generated significant buzz around the fine art market thanks to big-ticket auction sales. This includes a record-breaking $91.1 million sculpture of a rabbit. Auctioned in May 2019, it is the most expensive work ever sold by a living artist.
The global art boom is no passing fad. The 2019 annual report by Art Basel and UBS Global Art estimates that worldwide art sales surpassed $67 billion last year. Evidently, beauty doesn’t exist solely in the eyes of the beholder — markets stake an objective claim to its value.
It’s true that you can net serious returns by investing in prized artwork. However, investing in art has its share of risks and drawbacks.
My company specializes in alternative asset investing, which includes artworks. We have years of experience in alternative asset markets, though our knowledge of art investing is mostly secondhand. In this article, I’ll look at a variety of art investing pros and cons to help you determine if artwork is worth adding to your portfolio.
Art Investing 101
As with any financial investment, extensive research is a must. Before getting started in the snares of the fine art market, dedicate several months to passive observation of art auction news and valuation trends. To get a better sense of high-value art pieces and artists, speak to a curator or art specialist who may be able to give you an inside scoop.
As a rule, the works of prolific living artists are appraised at a value lower than those of a deceased master artist with a finite number of works attributed to them. Therefore, art produced by deceased authors or artists generally sells for more and accrues value faster than art by contemporary artists.
Once you feel knowledgeable enough to jump into the market and attend an art sale, don’t let the curators and consultants intimidate you. Often, gallery curators go to great lengths to impart their vast art history knowledge on collectors. Sometimes the advice and insight proffered by gallery experts can contradict your gut instinct about the value of the work. For this reason, online art auctions present an easier, less-intimidating environment for new art buyers.
In sum, art investing is hard work. For an artwork to generate significant returns, the buyer must consider the overall influence of the artist beyond media praise and public recognition.
Does Art Investing Pay Off?
Purchasing art is a type of alternative investment strategy. For the savvy art buyer, it can be a massively profitable venture, as demonstrated by Artprice in its list of the best-performing art stock sales of 2017.
The Artprice list clearly demonstrates the potential for incredible returns via modern art investing. In the case of Jim Crow (1986), the buyer sold the item for over 125 times their original investment after holding the piece for 25 years.
Jaw-dropping returns such as these are why the global fine art market is saturated with buyers looking to capitalize on the next sleeper hit. While sales like these are rare, they aren’t a coincidence either. Successful art purchases are the product of diligent planning and thorough research of the art’s historical and cultural significance.
Tips For Investing In Art As A Beginner
• Be wary of the risks.
Art is a highly illiquid asset class. If you’re looking to flip an undervalued artwork to make a quick buck, think again. It can take years to have your art piece sold at auction. That’s why it’s always recommended to consider art investing a medium- to long-term addition to your portfolio.
To mitigate the risks inherent to art buying, diversify your collection by purchasing art from various artists, artistic traditions and historical periods.
• Join the community.
To bolster your chances of making a good art investment, start building a professional network in the fine art space, and regularly attend art fairs and art auctions.
If this sounds like hard work to you, then you might be better suited for other avenues of alternative investing. Those who do well investing in art often have a deep appreciation for art and enjoy spending time at fine art socials, galleries and exhibitions.
• Invest in a facilitator.
The fine art market can feel something like an impenetrable old boys’ club. To help your entry into the market, consider hiring an expert in the art world. An art investing consultant can help you place well-informed bids on pieces and prevent you from purchasing a dud.
Is Art Investing The Right Decision For You?
To make money investing in art, you have to nail the basics. Treat your art purchases like alternative investments. As if you were purchasing stock or other securities, buy and sell high-value artwork through a reputable advisor who can facilitate research, bidding and maintenance.
In short, art investing isn’t for those looking for a get-rich-quick scheme. It takes many years, or even decades, for an artwork to appreciate, and there are many responsibilities that fine art owners must commit themselves to. For this reason, art investing is usually reserved for art lovers and enthusiasts.
Investing in art holds the potential for significant financial rewards. Blue-chip names such as Warhol, Basquiat, Kusama and Picasso are serious moneymakers in the global art market. The trick is to find the next historically significant artist before they become one. This, however, is an art in itself.
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