Art. It’s not just colors on a canvas; it’s a world of expression, stories, and, surprisingly, an opportunity for investment. Stepping into this world might seem complex, but don’t worry, we’ll talk about it in detail – on what is art, how to invest in art, its value as an investment and how to look at this fascinating world.
What Art means and How to Navigate It
Art is like a huge playground of creativity where there are no strict rules. It’s not just paintings in fancy places; it’s everywhere, from graffiti on walls to songs on the radio. To get into it, all you need is an open mind and a curious heart.
Sometimes, art tells stories or makes you see things in a different way. The cool thing is, it’s not just about what you see but how it makes you feel or think. It’s a way for people to connect and share ideas, even if they see things differently. So, jump in, explore, and find what speaks to you!
Look at a piece and see what it makes you ‘feel’ or ‘think’
Why is art valuable?
- A Solid Investment Opportunity
While art’s value may seem subjective, its reliability as an investment is undeniable. Over time, the art market has shown consistent growth, often outperforming traditional investment avenues. Its value endures, even in the face of economic fluctuations.
Image Source: caia.org
Contemporary art’s prices rose by a cagr of 14.0% from 1995 to 2020, surpassing the S&P 500’s performance.
- Diversification and Stability
In an investment portfolio, diversification is key. Art offers a unique diversification opportunity, its value often moving independently of other financial assets. During economic volatility, art remains relatively stable, acting as a buffer in a diversified investment strategy.
- Tangible and Intangible Returns
The returns from art investment go beyond monetary gain. Art offers tangible returns through potential appreciation in value. However, it also provides intangible returns—enriching lives, inspiring minds, and serving as a cultural and historical asset.
How to Invest in Art Pieces
1. Understand the Canvas
Investing in art isn’t solely for the elite or the art connoisseurs. It’s about finding your niche in a diverse landscape. Before diving in, educate yourself. Know the artists, their styles, and what’s making waves in the art world. Just like choosing a book to read, finding art that resonates with you is the initial step.
2. Start Small, Aim Big
You don’t need a vault of gold to start. The ‘Mona Lisa’ might be out of reach for most, but fret not! Starting small is the key. Begin with a budget that aligns with your comfort zone. You’ll be surprised at the hidden treasures waiting to be discovered within your budget range. Art investment isn’t just for the elite; it’s for anyone with a passion for exploring.
3. Unconventional Art Hunting
Galleries are great, but the world of art doesn’t solely exist within their walls. Online platforms, local art fairs, even your cousin’s friend’s exhibition—these are gold mines. Some of the most stunning pieces may hide in unexpected places.
4. Curating Your Collection
You’re not just buying random pieces; it’s about creating your own curated gallery. Choose a theme, a style, or simply collect what resonates with you. The art you pick should be something you won’t mind staring at every day. After all, it’s going on your wall, not in a vault.
5. Safeguard Your Investment
Okay, so you’ve landed a beautiful piece. Now what? Treat it like the crown jewels. Proper storage, framing, and care are non-negotiable. After all, you wouldn’t leave a Van Gogh lying around, would you? Take care of your investment, and it’ll take care of you.
6. When to Hold, When to Fold
Ah, the million-dollar question: when do you sell? The art market is a bit like a roller coaster, with values soaring and dipping. Know when to hold onto a piece and when it’s time to part ways. It’s not just about profits; it’s about knowing the story and value behind the art.
Risks in Art Investing
Investing in art isn’t without its risks. While it can be a rewarding venture, it’s essential to understand the potential pitfalls. Here’s an exploration into the risks associated with art investment.
- Market Volatility
The art market can be subject to unpredictable fluctuations. Values can rise and fall rapidly, influenced by various factors such as trends, the economy, and shifts in taste. This volatility can impact the value of your collection.
- Subjectivity in Valuation
Valuing art is subjective. The value of a piece can vary significantly based on individual perspectives and trends. It’s a world where appraisals can fluctuate widely, leading to uncertainty about the true worth of an artwork.
- Illiquidity
Unlike traditional financial assets, art isn’t a liquid asset. Selling a piece can take time, sometimes months or even years. This lack of liquidity can pose challenges if you need immediate access to funds.
Examples of artworks that were considerably less expensive 20 years ago and are highly valuable today
1. Claude Monet’s “Meules” (1890): In 1996, this artwork was sold for $12.1 million. In 2019, another one from the same series fetched over $110 million.
2. Andy Warhol’s “Shot Sage Blue Marilyn” (1964): This work was sold for around $4.4 million in 1995. A similar Warhol piece sold in recent years for well over $30 million.
3. Jean-Michel Basquiat’s “Untitled” (1982): In 2002, this painting was sold for about $1.04 million. Recently, another work by Basquiat reached approximately $110.5 million at auction.
Art Market in 2023
- In the first five months of this year, Sotheby’s, Christie’s, Phillips, Bonhams, and Artnet Auctions collectively sold fine art online, amounting to $155.8 million. 2023’s online sales soar over 300% higher than the $35.5 million recorded in the first five months of 2019.
- The United States has notably outpaced all other countries in spending on fine art auctions in 2023..
- Among the top 100 selling fine artists at auction in 2023, the number of women has decreased compared to the previous year. However, for the first time, more than one woman managed to secure a place within the top 20 highest-selling artists.
Trends in Art Market 2023
(As per: The Art Industry Trends Report 2023, artsy.net)
1. Abstract paintings are the top sellers in galleries.
2. Online sales are a big money maker for both new and established art sellers.
3. Inflation has caused galleries to unexpectedly raise prices on artworks. About 41% of those who were surveyed, believed that inflation is the primary factor affecting art prices. While 44% of gallery owner previously didn’t plan to hike prices due to inflation, they’ve had to adjust their strategies, aligning with the broader market shifts.
4. Newer galleries, especially those using social media, are finding their way. They’re selling more art to younger collectors and reaching them in unique ways.
Other Insights on Art Investment
> How Much Do Art Pieces Sell For?
Art prices vary significantly based on various factors including the artist’s reputation, the piece’s historical significance, its condition, demand, and current market trends. Prices can range from a few thousand dollars for emerging artists to hundreds of millions for renowned masterpieces.
> Ways to Invest in Art
Investing in art can be done through direct purchases of artworks, art funds, art exchange-traded funds (ETFs), art-based securities, or fractional ownership platforms. Each method has its pros and cons, catering to different investment preferences and budgets.
> What Art to Buy as an Investment
Investing in art involves thorough research. Look for pieces with established artists, historical significance, or emerging talents with potential. Diversifying between different styles, periods, and artists can help create a robust art investment portfolio.
> How to Pick Great Art for Investment
Factors such as an artist’s reputation, rarity of the piece, its condition, and provenance play crucial roles in selecting art for investment. Understanding market trends and seeking expert advice can aid in making informed choices.
Overall, sales of $1m+ Contemporary art have grown by 24.1% over the five- year period, from $2.69bn in 2018 to $3.34bn in 2022. (source – https://www.sothebys.com/en/articles/the-1m-contemporary-market )
> Investment in Art and Antiques
Antiques, while not always considered “art,” can hold significant value due to their historical importance and rarity. The market for antiques can fluctuate based on changing tastes and cultural significance.
> Investment in Art and Collectibles
Collectibles cover a broad spectrum, including items such as stamps, coins, and memorabilia. Similar to art, their value is often tied to rarity, condition, and historical significance.
> Investing in Modern Art
Modern art refers to art produced roughly from the 1860s to the 1970s. Investing in modern art involves understanding movements and key artists from this period, considering their historical importance and current market demand.
> Is Art Investment Tax-Free?
In some cases, investing in art may offer tax advantages. However, tax laws can vary significantly based on factors like location, the nature of the art transaction, and the duration of ownership. Seeking professional advice from tax experts is essential to understand the tax implications of art investment.