Like stocks and bonds, great artwork can increase in value. If an emerging artist goes on to a successful career, the value of their work will skyrocket. Plus the really wonderful thing about investing in art, is that you get to enjoy your investment every day.
ART AS A LONG TERM INVESTMENT
Profits from artwork won’t happen overnight. Experts recommend art investment for patient investors with a time window of 10 years or more, so think long term.
Many art investors and collectors here in Canada, include investment quality paintings in their estate planning, as assets to pass on to their family members.
One major perk of art as an asset is that its value doesn’t rise or decline with the stock market. Even if your stocks aren’t performing well, your art investment may be doing great. This is good news for the savvy investor who wants to diversify a portfolio and minimize risk. And ideally, though not always, art will continue appreciating in value over time. Very rarely does the value of good art go down.
Every original artwork is unique, and the art market has ups and downs just like any other market. When it comes to art, a lot depends on the artist’s reputation and on the economy as a whole, so you should be comfortable assuming some risk.
WHERE TO START
Start by deciding how much money you’re prepared to spend. Next, learn as much about the art world as you can. Find an art dealer or advisor that you trust. Visit local galleries and see what they have to offer; chat with curators, who will usually be eager 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 emerging artists tend to showcase their work.
WHAT TO CONSIDER
Your art collection should only be a small part of your overall investment portfolio. For most people art will be only a small fraction of a well-rounded investment portfolio. You may profit, but you’re highly unlikely to get a huge payout from art alone. Think of art like a real estate investment; extra, but not essential. Don’t rely on an art investment for steady income. It’s important to remember art is a non-liquid or illiquid asset. This means it’s difficult to convert into cash right away. Liquid assets, like stocks, bonds, and savings accounts, can produce cash more easily. Illiquid assets, like real estate and art, take much longer to sell even if they have great monetary value. Though it’s possible to sell your art, most investors don’t.
WHEN TO INVEST
Most art 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 a valuable asset! 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 to start investing in art. You can keep your art investments to just one or two pieces. But knowledge of the art world or working with a trusted art dealer who has this knowledge is key if you want to pick winners. At HatchGallery, we feel that the best approach to art investment is to consider the aesthetic pleasure first and the financial benefits second. We always say, first and foremost, buy what you love! Welcome any profits, but don’t plan your financial future around receiving those profits. Any money earmarked for retirement, for instance, should go into other assets.
That said, art investors can pick pieces with great long-term value. But enter informed, just as you would be if you invested in the stock market. Start by researching the artist you’re considering. Ask the following questions: Are the artist’s works included in any museums or famous corporate collections?
Have they won awards or gained other recognition for their work? Do they have an solid exhibition track record. Has the artist been involved in any important exhibitions? While emerging artists can be exciting, their reputations may or may not last. And this will affect the value of their artwork. The art world is very broad, so to narrow down your search, pick a genre or time period that interests you. Then find an art dealer with a solid reputation, to help you search for great pieces. We recommend working with an art dealer or art advisor who specializing in art.
Having someone in your corner helps when it comes time to determine the fair market value of an art piece, making sure you get your money’s worth. Once you’ve found your area of focus, know what kind of piece you’re buying.
No matter what, look for quality and good condition. Especially for pricey investments, it’s worth spending the extra cash to get a quality work of art.
IS ART A GOOD INVESTMENT
At the end of the day, this question really depends on your personal investment goals. If you want guaranteed returns on the money you invest, or if you don’t have much money to work with, you’re probably safer skipping the art houses and sticking to liquid assets. Brand new investors should also give their portfolio plenty of time to mature before taking the leap.
But for seasoned, confident investors who are enthusiastic about art—and who have extra funds to cover the costs—an investment in a painting or sculpture can be an exciting way to diversify a portfolio. With an eye for art and a willingness to take a little risk, a new or experienced investor can find art investment incredibly rewarding. Though it should only be part of your overall portfolio, art can round out other investments nicely.