To the uninitiated, artworks are only valuable to the rich, famous, well-informed, or highly interested individuals. This is not true. Most known artworks have been described to the average person as “priceless,” and, well, how exactly is that beneficial to the individual such as you or me? Simple. It gives us a leg up to invest in said artworks, and it lets us be amongst the first to learn how to invest in art before it becomes a mainstream trend.
There is an entire market of artworks waiting for investors to buy, sell, or simply hold onto them. In an unorthodox way, they are distant cousins to stocks; except these works rarely lose value and, under the correct conditions, will usually only gain value. Also known as an investor’s dream-come-true.
Before we continue, Financial Professional wants to remind you that this article is educational in nature. Any securities or firms named are for illustrative purposes only and do not constitute financial advice. Always do your due diligence and consider your situation – and the help of a licensed financial professional – when making investment decisions.
If you’re in the market for new investment opportunities – or even your first – we can help! With Financial Professional’s marketplace, you can research firms and compare opportunities to find the right investment for you.
The Longevity Of Art
The first thing to note is that the art market is not niche area; it is a thriving trade. In fact, Artbasel’s annual report stated that the global art market climbed to $64 billion in 2019.
“So art investments are the key to true financial freedom?” It is not, and you should not take any of this as such. Rather, art is a single key to a door with a million different lock-combinations. Art is simply a market that has proven itself valuable time and time again. The same is true of investing in the stock market, which is sometimes viewed as a gambling table for those looking to get rich quick.
At the same time, art is fickle. The price rarely devalues from its point of creation onward. Either it was worth nothing to begin with, or it was worth something and the right moment is waiting to happen for the price of your artwork to skyrocket by 5, 10, or even 100 times the value you bought it for. The most common moment for the price to rise, unfortunately, is the death of the artist.
Once an artist dies, their art becomes finite and the limited artworks now become the perfect model of supply and demand. There is no more supply at this point. You cannot commission anything from the artist and must track down his or her arts to own (whether that be to invest or collect is up to the investor).
So again, asking the question of “how to invest in art?” requires you to ask yourself other, more important questions. How do you pick the right piece? What is the correct way to get into the art investment market? What should I be putting into this market to make it a worthwhile investment?
Investing in Art: A Crash Course
Before you dump your life-savings investing in art markets (don’t do that, first and foremost), it’s important to be well aware of the aspects and knowledge you must require beforehand.
First: Cozy Up to the Curators
Investing in art is not something you want to spend a week researching. Breaking into this investing world is nothing like the stock market. It’s been made easier by sites like artprice.com, where you can see what other people price their collections for. However, the difference between the art market and the stock market is that stocks are not subject to the thoughts and opinions of a group of appraisers or an individual appraiser.
Here, you are simply at the mercy of curators, art specialists, and appraisers who will tell you the value of your investment. These are the people you must get to know if you plan to make art investments. Curators are knowledgeable on art in the same way your broker is knowledgeable on stocks – their knowledge most likely surpasses yours by a landslide. Trust them, pick their brains, and in a year you may be ready to dig into that scene.
Second: Take Your Time
Art is a medium-to-long term investment. It is not something that will happen overnight. While it’s not as common as fluctuations in the stock market, art investments can devalue if you are not the first to pick it fresh from the picking table.
Many things can factor into the devaluation of your art investments, such as the reputation of the artist, the legitimacy of their work, or even the overall quality when compared to new and evolving standards. Just because you bought it for $10,000 does not mean you will be able to sell it for $10,000 (if you’re able to sell it at all). The pieces you find interesting may not be interesting to the next person at all. It may not be worthwhile.
The only sure-fire way to invest is to randomly stumble upon an original – and pristine – artwork from any period before the 19th century. If that is your plan, then you might as well play the Mega Millions lottery, too, since you’ve got a better chance of hitting that.
Last: Do Your Research
Then, you’ll want to scour online auction houses to get a better understanding of prices, listings, and the overall temperature of the market. This is not a “Buy High and Sell Low” game. It is knowing how to identify worthwhile artists/artworks and making your art investments worthwhile based on the perceived initial and prolonged value.
I said it before, and I’m saying it again now: talk to the curators. Again. And again. Get familiar with them because their knowledge is a vast ocean with unimaginable treasures inside.
If you don’t take heed to these steps, you’ll be subject to the risks and rewards that investing in art will inevitably sway you back and forth on.
Risks and Rewards of Investing In Art
With anything that is considered an investment, there are risks and rewards. Investing in art is no exception.
Risks and Warnings of Investing in Art
- The learning curve is incredibly steep. You cannot just take anyone’s word for this market. Multiple curators and appraisers need to be used on every single piece. If you take one person’s word for it you may get lucky and turn a great profit, but the much more likely outcome will be you attempting to sell art for a greater price than its true – and much lower – value.
- It’s not an overnight investment. These investments are years or decades-long. The price can go up, but if you aren’t willing to wait, then this level of investing probably isn’t for you.
- The buy-in price usually starts around $1,000. If you cannot spare that as a minimum, you should turn to other, more conventional, investing means first.
Rewards of Art as an Investment
- The profits can be massive. Over 10 times your initial investment can be made if you land on the perfect art investment.
- While not tiny, the community is so tight that you are assured easy and smooth entry in. You may have to spend more money to hire facilitators or to go to in-person auctions, but once you are in and have a good feel for how things are run, there is no reason why you shouldn’t excel on a knowledge-level.
- You’ll become a more well-rounded person in the process. While this may seem silly, opening yourself up to the world of investing in art can be not only enlightening on the true value of art, but of a whole treasure trove of knowledge worth learning about. Enjoy the investment, and you’ll reap the intellectual rewards.
A Final Word on Investing in Art
Investing in art is also possible online with companies such as Masterworks. Masterworks allows you to buy and sell shares that represent an investment in iconic artworks. As an investor, you will have the ability to create a portfolio of different pieces of art curated by Masterworks’ research team.
Hopefully, we’ve assisted in your journey of learning how to invest in art. Art investments are very lucrative, but it requires an initial understanding which may take upwards of a year to feel comfortable enough to even begin. It is not for investors who are more akin to gamblers, as the value of your art investments can take years or decades to accrue. If you do decide to dabble in the world of art as an investment, we hope for prosperity in your new adventures.