Updated: Jul 26
Investing has many types, so, what is investing in general? Well, in an economic outlook, investment means the purchase of goods that are not consumed today but are used in the future to generate wealth.
There are also four types of investments you can choose from and each one of them is more remarkable than the other. In today’s article, we will be going deeply through investing in art, we’ll be answering all the ongoing questions in your head, just keep on reading…
Art As An Investment
"Art is definitely a perfect way to diversify your investment portfolio."
"Art can be a hedge against inflation."
You’re probably thinking about how is art used as an investment, matter of a fact, art is a very unique asset class with a low correlation to bonds, stocks, as well as other traditional investments. So what happens when stock prices dip? Art keeps on holding its value.
That means if you’re an investor and looking forward to preserving your wealth during a volatile economy, art can be a hedge against inflation.
Pretty much, we can say that investing in art is definitely a perfect way to diversify your investment portfolio. If you truly love art and you’re passionate about it you can invest in this asset for sure, and of course, before any investment, you’re required to make a lot of research.
Why Is It Important To Invest In Art?
"The expectations that demand will overcome the supply."
If you’re looking for the importance of investing in art, here are they:
· It allows collectors to enjoy and see their investments daily in a way that isn’t available to people who invest in bonds and stocks.
· Investing in art is a sense of financial benefit of an artwork’s appreciation in value over time mixed with a sense of personal satisfaction.
What Should You Know Before Investing in Art? Art investment means you’re buying artwork with the expectation that demand for that piece or similar pieces will increase faster than the supply. So, if that happens, the value of that artwork will increase and in return, you might be able to sell it for a profit.
And before investing in art you should know the following:
· Choosing an artist is not an easy task: it’s not easy to discover the next famous artist before they’ve earned a reputation and start commanding high prices for their artwork.
· Art requires maintenance: artworks require a lot of maintenance. For example, if you’re displaying art in your home, then you need to be mindful of humidity, sunlight, temperature, and different factors that could degrade the work. For sure, you can opt to have a storage company keep your artwork in a climate-controlled environment.
· You might have to hold your art for a while: the art market is relatively illiquid even when you manage to acquire an artwork that increases in value.
· You need to be mindful of other factors with the sale and purchase of artwork that include transportation expenses, authentication, appraisal fees, sales tax, and insurance, and you might want to buy a type of display mechanism for your piece of art or a nice-looking frame.
Examples of Art Investments:
“Some collectors become investors.”
Even though investing in art can be full of risks –but any investing is, isn’t it?-, let me tell you about some art investments in the upcoming lines…
Back in 2012, Mark Rothko’s canvas fetched a record $87 million at auction.
Furthermore, a collection featuring other American abstract expressionists, including one piece by Willem de Kooning along with another one by Jackson Pollock, set new records, matter of a fact, the collection sold for $500 million in one of the highest-priced private art deals ever! Robin Anthony curator of the Royal Bank of Canada’s 4,500-piece corporate art collection in Toronto” says: “Most people start collecting because they’re interested in and want to learn more about the visual arts,” “Some collectors become investors”
How to Invest in Art?
"Research is very important when investing in art."
According to McNeil, a person should abandon notions of “what you like and don’t like”. We can’t say that art investment isn’t risky, I mean, trying to predict emerging trends is something challenging to consider especially for those who are still new to the art market.
Based on a report by the TEFAF Art Market: “Only 1% of all artists generate more than half of all artwork sold globally.” Research is very important when investing in art, just like any other investment. It is recommended to read about art and artists before investing, not only that but also visiting art galleries and museums, as well as establishing relationships with art professionals and artists.
And before an auction, you should know how much the artwork could probably cost, a contemporary piece at auction is likely to sell for $1 million or more as said by McNeil.
However, if you’re not willing to dive deeply into the art market, you can spend $5000 or less for artwork by an up-and-coming artist represented by a reputable gallery. There is also another option and it is to invest in mutual funds that invest specifically in works of art.
How to Make Your First Art Investment?
You could find your masterpiece at auction houses and art galleries (offline and online). You can check local art fairs. Discover artists you like through social media channels such as Instagram or online magazines. Buy artworks directly from artists’ websites. Know more about the NFTs that represent the ownership of digital art.
We still have a lot to discuss regarding art investment, you need to stay tuned for the upcoming articles on our website…