The art of investing.

AuteurLabbruzzo, Dominique Calco
Fonction Art & culture: investment

Are you a first-time investor?

While tastes vary, buying is almost always motivated by passion. A piece of art work may have far more emotional value to an individual than its price tag suggests. Nevertheless, the art market has its own rules and you should be aware of them.

The art market

The colossal prices in the market today are given for only a small number of top names being chased by a group of trophy hunting billionaires, who only want certain works from Picasso, Warhol or Basquiat. The top works also have a starry provenance, coming from great collections, which further narrows the market. These are 'big-number items', only available to the mega-wealthy. Statistically they skew the entire market, disguising a weaker situation lower down the scale.

Investing in art requires careful consideration and will not necessarily provide big returns. Art remains an unpredictable investment, subject to changes in trends and fashion. It can be hard to sell when you want to realise your investment and returns remain hard to accurately measure. This is why financial advisers apply strong wealth warnings to so called alternative investments, though some strategists argue it can diversify very large portfolios.

Another possibility for prospective collectors is to rent art from online companies, which is becoming popular. It is also common for groups of people to pool money into an art fund and hire an adviser who will buy a work and sell it later, hopefully for a profit.

New ways to track down coveted pieces are countless, with many galleries also launching online stores and auction houses, making art buying more accessible and affordable. The rise of art websites is another big trend that is helping would-be buyers. These online transaction platforms could eventually increase valuation of art as they add liquidity to the lower end of the market.

Turning a profit

If you are looking for long-term value, it is important to first set a budget and then invest in major works within that price bracket. Quality should play into your decision, but remember that a work develops historical importance based on its critical acclaim in the art community. If you can afford them, buy only works of renowned artists, due to the availability of a detailed auction history of their art.

If you are a first-time buyer, it may be worthwhile to buy through an art consultant or advisor who has in-depth knowledge of the current market. Many private wealth firms offer...

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