Investing is a fantastic way to grow your portfolio and increase your wealth. While most people hear “invest” and think of the stock market and property investments, today’s global market is beginning to turn its head towards art investment and investing opportunities.
In the United States alone, fine art is a $10 billion per year industry which has averaged a 10.47% annualized rate over the past 50 years. When you look at the numbers over that same period, the index for stocks shows that their rates are only slightly higher at 10.95%.
Art is a decently attractive investment, so why aren’t more people buying into it?
Ultimately, art investment is not the perfect vehicle to generate rapid wealth; however, art is a unique and secure way to hold wealth over the long term, which can be just as valuable as building it in the first place. Furthermore, for sophisticated investors who hope to make statements through their investments, there is no comparison to investing directly in beauty.
The Value of Art
Art investment can be a risky endeavor, because the price of any given piece is determined by how much the art market is willing to pay. The art market’s willingness to pay for a certain piece is dependent on a number of factors including current art trends, whether there’s buzz around a piece, and whether the artist has someone who can publicize their artwork for them. The value of a given piece is also influenced by subject matter, medium of the piece, condition, provenance, and size.
Art is a Long-Term Investment
When investing in the stock market, you can purchase a stock one day and turn around and sell it the very next day if you so choose. With real estate, while the purchasing process takes a bit longer, you can start selling the property as soon as you’ve purchased it. Art, however, operates a bit differently because art is not a liquid investment; investing in art is a long process that often involves appraisals of the piece, meeting with dealers and lawyers, and handling insurance for the work. It’s also difficult to get into the world of art, even through mutual funds, because there is often an expensive buy-in and a mandatory holding period to build equity in the art piece.
If you’re just starting out in art investment, consider starting small. Just like you wouldn’t jump into the stock market by investing in the top of the market, it’s better to start with up and coming artists rather than the ones who are already at the top. Galleries are a great place to start looking for smaller pieces to begin building your collection.
Art is a Personal Investment
At the end of the day, if you’re choosing to invest in art, do it because you love the piece and not because you’re hoping to get rich off of it. Although works of art can be valuable, it’s unlikely that you’ll be able to fund your retirement from your art collection. Allow the art you collect to be a statement of your taste and not your entire plan for investing in your future.