10 Sep Is Art a Good Investment? – How to Invest in Art in 2021
Not only is art a great way to embellish a space, but it can also be a great investment. Not linked to the stock market, art can diversify your investment portfolio, whilst also giving you something nice to display.
Before investing in art however, there are certain things you should take into consideration. We talk you through everything you need to know to decide whether art is a good investment for you.
Finding the Best Art to Invest In
The most difficult part of investing in art is deciding which particular pieces to purchase. You have to consider things such as artist reputation, maintenance, trends, and associated costs.
Choosing the Right Artist
First and foremost, you need to do your artist research. Art investment is not as simple as choosing a pretty picture. The market is subject to a wide range of factors that can affect the price.
Consider the artist’s reputation; are they in fashion at the minute? Is interest likely to drop off?
For a lower risk investment, you may want to choose an established artist, however, pieces by them will likely cost more. Lesser-known artists are ideal to invest in but spotting an up-and-coming artist is incredibly difficult.
Whether an artist is dead or alive also affects the price tag, surprisingly. Unfortunately for artists, pieces by those that are deceased tend to fetch a higher price tag than those that are alive.
Art is Not a Liquid Market
If you are looking to invest in art, you must understand that it is not a liquid market. This means that you may have to hold an art piece for years before you can make a profit and convert it into cash.
Most art collectors will have to hold a painting for at least 10 years before any real profit can be seen from it. You will also have to bear in mind that if you wish to turn your art into a liquid asset you may incur high fees. This could include auction house fees, broker fees, and more.
Decide What Type of Art You Want to Invest In
There are also further options within these categories, from prints to reproductions to bespoke pieces. Originals will fetch a higher price tag but they will also cost much more to buy so, you will need to think about how much money you are willing to invest.
Once you have decided what kind of art you plan to invest in, you should consider maintenance and storage costs. You need to ensure that the artwork retains its value. If a painting is displayed it may be subject to sun damage. There are certain companies that can keep your art in secure, climate-controlled environments to ensure no damage occurs.
Other Associated Costs
When asked if art is a good investment, most people simply think about the purchase price of the art versus the selling price. There are many other associated costs that should also be taken into account however.
When purchasing art, you may incur tax, shipping, and insurance fees, as well as appraisal and/or broker fees. Always add the cost of these things to the purchase price of the art for an accurate valuation.
Is Art Still a Good Investment in 2021?
After a challenging year, you may be wondering if art is a safe investment. After all, the impact of COVID-19 on the economy is as yet unknown.
The good thing about art investment is that it does not follow the stock or bond markets. This means that even if stocks and bonds decrease, the value of your art may continue to increase.
The art market is based more on trends and fashion. You should never see art as a short-term investment as it can take many years to see a return. It is however a great way to diversify your investment portfolio to ensure it is not too heavily reliant on the stock market.
This does often mean that a lower return on investment is achieved through art but, the benefit is that you can invest into something you love that will also bring you joy.
How to Invest in Art
If you are new to the world of art investment, you may find it daunting and overwhelming. This doesn’t have to be the case. You can invest in art at many levels, meaning there is a piece out there to suit almost anyone.
You must first decide how much you are comfortable spending. Those that spend a large amount of money on an art piece incur the highest level of risk.
You may also choose to go down the low-price/low-risk route. In this case, you can purchase art from up-and-coming, lesser-known artists. If they do not become more famous then the value of their art may not increase, but you will not have spent a large amount of money therefore the risk is low. If they do happen to become a popular artist, you will make the most profit on these kinds of investments.
There is also something known as ‘blue chip artists’ – these are artists whose work is not affected by fashion and trends. The art always retains its value and the price tag remains steady. This includes artists such as Andy Warhol. Pieces by ‘blue-chip artists’ tend to have a high price tag but are low risk as they are unlikely to depreciate in value.
We put together a guide on how to start your very own art collection that goes into more detail.
Once you know how much you want to spend on your latest art piece, you can start the research phase. Research is essential to give you the best chance of making a profit on your investment.
You must research the artist themselves, the value and selling prices of their previous work, and more. You can conduct this research via various avenues: online, by visiting local galleries, by speaking to art curators or brokers.
When you have found a piece that catches your eye and you are happy with your research, it may be worth paying for it to be appraised. This is where an independent party values the art based on their expert judgement. This can help to determine how much you are willing to pay for the piece and if it is likely going to make a good investment.
You can also check art indexes such as the Art 100 index. This index tracks the performance of artists and their pieces at 22 auction houses around the world. This can help you to determine how the art market is performing and if the time is right to invest.
After conducting your research, you are ready to purchase. There are a wide range of places you can purchase art.
You could buy online on sites such as PICTOCLUB, at local auction houses, or galleries.
If you are looking for a more affordable option, or do not want to store/maintain the art piece an art fund may be the right option for you. Art funds are much like investment funds in the fact that you can partially own a piece of work. This is a great way to start your journey into the world of art investment. It can give you a taste of the process at a lower rate of risk.
There are also a number of organisations such as Masterworks. They do all the hard work for you, researching and purchasing art that they feel will bring a good return on investment in time. You can then buy shares and they will update you on the progress of your art investment.
Is Investing in Art Right for You?
Art investment can be fun and rewarding but it’s not right for everyone. Find out if it’s right for you.
Invest in art if:
- You have a passion for art and have a working knowledge of the art market
- You are willing to invest time into researching art before purchasing
- You are in no rush to see a return on your investment – art investment is a long-term gain deal
- You are able to afford the piece even if you do not see a return on your investment
- You are able to afford the associated costs to maintain and store the art piece to ensure it does not depreciate in value
Do not invest in art if:
- You are looking to see a return straight away, as you may on the stock market
- You do not have an interest in art and cannot dedicate time to researching and immersing yourself in the art world
- You need to be able to liquidate your assets at short notice