In recent newsletters we have taken a look at alternative investments and for this week we thought it would be interesting and perhaps helpful to take a quick look the basics of investing into Art. Over the centuries we have witnessed and read accounts of how the very wealthy amongst us have acquired some of the world’s most amazing paintings, and at prices which often seem to defy gravity. So why do we have such a long history of investing into the arts, how has the market changed over the years and what are some of the key principles that a new investor should keep in mind when looking to invest into the art markets.
It can be a hard lesson to learn, but it is critically important that true investors into art, realize that it is important to invest in original and handmade work, which historically has the most potential for price appreciation. Stay away from prints that are made from the original works, these are machine generated and often with no limit as to the amount of copies that can be reproduced. Whilst some specific works may print limited editions, most do not, and we encourage those investors who are starting out into the arts, to steer clear of investing into prints.
Whilst it can be exciting to discover the next unknown artist, it is fraught with danger, most especially for beginners, and whilst exciting returns come from finding the next Picasso, it takes many years of experience and exposure in order to have any chance of success in this way. So, for beginners we stress the importance of staying with well-known and recognized artists and galleries, check to see if other people have purchased work from the artist and ask around as to what prices have been paid for such work over time.
Just as with all financial markets and advisors, it is also important to do your homework and only deal with art brokers that are well known or perhaps come recommended by someone you know.
Do your research and meet personally with the broker to make sure they have the necessary knowledge and connections within the particular art markets that you are most interested in. An alternative for the beginning investor is to also consider using an art gallery to facilitate your first investment, but make sure you ask them to outline exactly their commission structure and be wary of those who charge outrageous commissions of 50% or more.
Once you begin to learn the basics and get a better appreciation for art as an investment vehicle, you will begin to fine tune your process and increase your knowledge, and your eye, for good quality artwork and for passionate artists who are committed to their craft. This is where investing in art becomes much like a hobby and it can be, not only, enjoyable but exceptionally rewarding over time as you develop your capabilities. In general steer away from those artists who have taken it up as a hobby or perhaps as a side job and search out those who have a complete dedication to their craft.
As you develop your capabilities and appreciation of what is available in the art markets you are interested in, then we suggest you maintain a bias towards investing in works of art that are original and into artists that are producing their own particular style, theme or perhaps variation of a well-known style or artist.
For most investors a little bit of art in their portfolio can be a great thing and unlike most forms of traditional investments, you may be able to even bring your investment into your life, hanging your piece on a wall in your house or perhaps the office or boardroom. And if you get it wrong and your investment doesn’t quite generate the return you were looking for, at least you have the memories and the appreciation that comes with owning a piece of art that caught your eye.