If it is something you truly 15, investing in art might be a great idea. But it can be risky, so you need to do your research. The art market has become one of the hottest new investment crazes in the past few decades. Pieces are often bought by painting and sculpture collectors with an eye towards adding to their investment portfolio.
But will you be really earned a profit by art investment? Or is this asset class hype?
How do artwork investments work?
Like stocks and bonds, artwork can increase in value. The cash value of their work will skyrocket if an artist goes on to a career that is successful. An Art Basel report quotes global art market sales reached over $67 billion in 2018.
Art is a long-term investment
Profits from art won't happen overnight. Experts recommend art investment for individual investors with a time window of 10 years or more, so think long term.
Art investors include paintings in their estate planning as resources.
The art market follows principles of its own
One major benefit of art as an asset is that its value doesn't rise or decrease with the stock exchange. Even if your stocks aren't performing your art investment might be doing great news for the savvy investor who wants to diversify a portfolio and minimize risk. And ideally, though not necessarily, artwork will keep on appreciating in value over time.
Art is risky
Every artwork is exceptional, and the art market has ups and downs just like any other market.
As it's impossible to determine an artwork's true value--a lot depends upon the artist's reputation and on the economy as a whole--you should be comfortable assuming some risk.
Start by determining how much money you're prepared to spend. It needs to be an amount you can afford with in the event the artwork depreciates. Don't forget to factor in storage and maintenance expenses.
Then learn as much about the art world as possible. Visit with local galleries and see what they must provide; chat with curators, who will be willing to answer any of your questions.
If you live in or near a city, you're probably close to gallery openings and art fairs, where up-and-coming artists have a tendency to showcase their bits.
Read sites like Artnet and online auction houses like Sotheby's to get a sense of how the market functions.
You can begin narrowing down your research to see a particular artwork costs After a piece or artist catches your attention. The app Magnus provides up-to-date pricing information for prospective investors -- take a photograph of the art and they will tell you the specifics. Your next step is to acquire the artwork appraised by a professional appraiser to determine its quality.
You can purchase shares or purchase an artwork yourself -- often the option -- through an internet marketplace.
Since this is the information age, plenty of high-end art sells online. But before you buy over the Internet, ensure you're purchasing from a legitimate gallery, dealer, or investment company.
Because they do the majority of the work for you, masterworks is a great alternative, especially for the novice art investor.
With Masterworks you store or do own the artwork. Instead, you and many other investors buy shares in works vetted by experts for authenticity. Their minimum investment is $1,000, which can be on the low end for art and makes a good starting point.
Similar marketplaces include Maecenas (where you can purchase shares in paintings) and Saatchi Art (where you can browse and purchase directly online).
It should be a part of your portfolio
You may gain, but you're highly unlikely to get a massive payout from art alone.
Consider it not essential. Don't rely upon an art investment for income. And don't forget you will be paying taxes on any profits, because the IRS considers art a collectible.
Art is non-liquid
It's important to remember art is a non-liquid or illiquid asset. This means it's hard to convert into cash right away.
Liquid assets, like stocks, bonds, and savings account, can produce cash more easily.
Though it's possible to sell your art, most investors do not. Since art costs fluctuate regularly there are no guarantees promoting will make you a profit.
Below are a few signs the reward might outweigh the risk.
You enjoy art
Most artwork investors start out as collectors. If you love going to galleries and you're already on the lookout for a great piece to add to your home, turn that appreciation into an advantage! But if you don't like art for its own sake, other investment options will serve you better.
You don't have to be a collector. You may keep your investments to just one or two pieces.
Welcome any gains, but do not plan your financial future around receiving those profits. Any money earmarked for retirement, for example, should go into other assets. In fact, one Stanford study says art is unlikely to enhance any portfolio. Bottom line: do not invest anything in art you can't afford to lose.
You are willing to research
Having said that, art investors can select pieces with great long-term value. But enter educated, just as you would be if you invested in the stock exchange.
Begin by researching the artist of the work you're considering. Ask the following questions:
Are their pieces included in collections that were famous or any museums?
Perhaps they won awards or gained additional recognition for their work?
While up-and-coming artists can be exciting, their reputations may or may not last. And this will affect their piece's value.
You can afford the upkeep
Art investors get to control. But you are responsible for keeping the artwork in pristine condition, which means factors such as humidity and sun.
If you display it maintains its quality. You'll cover that as well if you put it. Add the price of an authenticity certificate and insurance costs, and your maintenance bill adds up.
What to look for when buying artwork
The art world is wide, so to narrow down your search, choose a genre or time period that interests you. Find an expert to help you look.
We recommend working with an art adviser or an investment company specializing in artwork (we've listed some options below.)
Having someone in your corner helps when it comes time to find out the fair market value of an art piece, making sure you get your money's worth.
Know what kind of piece you are buying, As soon as you've found your area of attention.
Works of art or originals come with the price but the best payoff.
Copies or prints are affordable but less likely to turn a profit. The highest quality print is called a giclée (zhee-klay). It's similar to the work than prints, but also more expensive. Usually, rarer prints are more valuable. 1 print from a small number of limited editions will have more significance than a print with several copies floating around.
Reproductions are mass-produced copies without a run. They're the option, but they worth the least. You won't see any profit from a reproduction.
No matter what, start looking for quality and good condition. For investments that are pricey, it is well worth spending the extra money to obtain an appraisal.
Where to Search for art
Auction houses, galleries, museums
Museums and galleries, of course, are alternatives that are amazing. Research any galleries beforehand to learn as much as you can.
Auction houses are a environment, if you are lucky, but you can score a masterpiece. Be aware auction houses charge a buyer's premium in addition to the sticker price.
Is fine art a good investment?
At the end of the day, this question really depends art worth investing in on your personal investment goals.
If you want returns on the money you invest, or if you don't have cash you're probably safer skipping the art houses and sticking to liquid assets. Brand new investors must also give their portfolio plenty of time before taking the leap to mature.
But for seasoned, confident investors that are enthusiastic about art--and who have extra funds to cover the costs--an investment at sculpture or a painting can be an exciting way to diversify a portfolio.
With a willingness to take a danger and an eye for art, a new or seasoned investor can find artwork investment incredibly rewarding. Even though it should be part of your portfolio, investments can round out well.