Contents: Investing in Art for Beginners
- Is Investing in Art a Good Investment?
- How Do I Start Investing in Art?
- What Do I Need To Know About Buying Art as an Investment?
- Conclusion: Beginner’s Guide to Investing in Art
Disclaimer: I am not a financial advisor and the information in this post should not be taken as investment advice. It is simply for general educational purposes. Please do your own research or consult a professional investment advisor before making any investment decisions. Whenever you make an investment, you do so at your own risk.
Is Investing in Art a Good Investment?
Absolutely! Here are a few reasons why investing in art can be a good investment:
- Art is a great asset because it’s a recession-proof investment. Like the real estate market, the art market isn’t correlated to the economy/stock market. It’s driven by supply and demand. For example, if a well-known artist has recently retired or passed away and there’s enough demand from art investors but limited supply (no more artwork is created), you’ll likely see the artist’s artwork go up in value.
- As with stocks and bonds, the value of artwork can increase in value over time. The size, condition, rarity, and historical significance of a work all play a role in determining its eventual worth. While there is no guarantee that any piece of art will increase in value, a well-chosen portfolio can offer investors the chance to see their investment grow over time.
- Art can be a source of passive income through rental income or resale profits.
- If you do your research and are OK with some risk,
you don’t need a big budget to invest in art and to see great returns. Although riskier, investing in emerging artists is a great way to start an art collection.
- Another benefit of investing in art is the enjoyment factor. Many people find that they get more pleasure from owning and displaying works of art than from other types of investments. For some investors, the emotional rewards of owning art are just as important as the financial ones.
How Do I Start Investing in Art?
If you’re not super wealthy and can’t afford million-dollar paintings, buying fractional shares is the easiest way to start investing in art. (If this term frightens or bores you, don’t worry! I’ll keep this post super simple!)
What are fractional shares?
If you want to buy a piece of art, but don’t have enough money to buy the whole thing, you can buy a fraction of the art (a fractional share). For example, let’s say a painting costs $100,000. You could buy 1% of the art for $1000. And then another investor could buy another 1% of the painting for $1000. And then another investor could buy 2% of the painting for $2000, and so on.
And if the art goes up in value, so does your investment.
The easiest and safest way to invest in fine art by purchasing fractional shares is by using Masterworks. (If you’re doing a lot of research on how to invest in works of art, the name Masterworks will come up again and again).
Masterworks is a complete online platform for investing in art that allows anyone to buy fractional shares of high-end art. This site offers a new, innovative way to invest in art, and provides access to some of the world’s most iconic paintings and sculptures from well-known artists like Warhol, Basquiat, Kaws, Banksy, Picasso, and Monet!
How does it work, exactly?..
- An expert team at Masterworks evaluates works of art that are available for sale.
- If a work of art appears to be a great investment, Masterworks buys the piece.
- An individual investor can buy fractional shares of that artwork (or can be a diversified pool of artwork).
- Once the artwork sells (usually within 3-10 years), investors are entitled to a percentage of the proceeds.
Masterworks is definitely worth researching, especially if you’re really serious about investing in fine art but you don’t have a lot of starting capital.
But what if you want to research and buy art on your own? What if you want to buy art as an investment and actually physically possess the artwork?..
What Do I Need To Know About Buying Art as an Investment?
If you’re not interested in fractional shares and you want to learn to invest in fine art by starting your own private collection, where do you start?
Here’s a quick beginner’s guide on what you need to know before buying art as an investment:
Research Artists & Their Artwork
Investing in art is not unlike any other investment. You need to do your homework before you put your money down.
Know what type of art you are interested in and learn as much as you can about it before making any purchases. Do your research on the artist and their work before you get carried away with a piece of art you love.
A great site to learn what well-known and emerging artists are currently trending in the art world is Art Collectorz.
Make sure you know what the work is worth. You need to be able to determine if the price of a piece is too high or low for what it is and why.
Look at the artist’s track record. How many pieces have they sold? What is the range of prices their artwork has sold for? The more successful an artist is, the more likely their artwork will appreciate in value.
Also, make sure to take a look at the condition of the artwork. Works of art that are in excellent condition will be worth more than pieces with visible flaws.
Buy Art You Love
Don’t buy art with the sole purpose of flipping it for a profit. This is not always a good idea and you can end up losing money in the long run.
Buying art should be more about your love of the piece. It’s important to buy what you love and not what you think will appreciate in value. That is a very risky venture because there is no telling what the art market will do.
Buy Art From Reputable Sources
In the art world, fakes and forgeries are becoming increasingly common. With the advent of technology, it is now easier than ever to create convincing reproductions of artwork.
To limit the risks of purchasing a fake, always buy from reputable dealers, galleries, or directly from the artist. If you are buying from an auction house, make sure the auction house is well-known and has a good reputation. (Check out my post “Affordable Art To Invest In” for a list of reputable online art galleries where you can get limited edition prints and original art).
This will help ensure that you’re getting a quality piece of art that is worth the money you’re investing.
A piece of art is only worth as much as the market is willing to pay for it, and in order to maximize its value, it is important to be able to prove that it is authentic. There are a few ways to do this, the most important of which is through documentation.
If a piece of art has been well-documented throughout its history, it is more likely to be considered authentic by the experts. This means tracking down old invoices, receipts, letters, and any other records that mention the piece.
This can be a difficult and time-consuming process, but it is worth it if it means getting top dollar for the artwork.
Avoid Restored Artwork
If you’re a beginner art investor, you should probably avoid pieces that have been recently restored.
While it’s not necessarily a bad thing if a piece of art has been restored, it may devalue the piece and make it less appealing to potential buyers down the line. Even if the restoration was done by a professional, it might not be worth as much as an untouched piece of art.
Diversify Your Portfolio
Similar to any other investment opportunity, don’t put all of your eggs in one basket.
By diversifying your portfolio, you will be less likely to lose everything if one particular artist or piece of artwork doesn’t pan out. However, some investors prefer to focus on one art style, while others build a more diverse collection. This can be a highly personal decision.
Be Ready for a Long-Term Investment
Investing in art can be a long-term commitment with no guarantee of a return. While there are some art investors who have made a quick profit, most take a more patient approach and wait for the right buyer to come along.
Many art collectors start out as hobbyists, buying pieces that they love and enjoy displaying in their homes. As their collections grow, they may decide to sell some of their pieces in order to upgrade to better-quality works. Over time, they develop a keen eye for spotting promising artists and trends, and can often make a tidy profit when they resell their collection.
Of course, not every artist will become the next Picasso or Monet, but with careful research and a bit of luck, art investors can make a healthy return on their investment.
The Best Art Investment Tip Ever…
If you are not sure about a piece of art, don’t buy it.
Conclusion: Beginner’s Guide to Investing in Art
Investing in art can seem like a daunting task, but it doesn’t have to be. With a little research and guidance, anyone can become an art investor.
The first step is to educate yourself on the basics. You should learn about the different types of art investments, as well as the risks and rewards associated with each. There are many resources available online and books (Amazon) that can help you learn more about this topic.
Once you have a good understanding of how art investing works, you can start looking for opportunities to invest.
There are many ways to do this, such as attending art fairs and auctions or working with an art dealer or advisor.
You can also invest in artwork directly through galleries or the artists themselves. Or if learning about art funds and fractional shares is more your style, visit sites like Masterworks. (If you’re interested, you can also learn about crypto, NFT, finance, and other alternative investments on Masterworks’ site.)
Just keep in mind that you don’t have to spend a lot of money to buy a piece of art that you love. There are many factors to consider beyond the price tag. Do your research and take your time in choosing a piece that you will enjoy for years to come.