Are you an investor? Chances are you’ve invested for retirement, in the form of a 401(k) or an IRA, or perhaps you own real estate or have a stock portfolio at a brokerage. Today, there are countless options for investing for your future. One investment that might not immediately come to mind is art. Although collecting and investing art has long been considered to be something done by the ultra-wealthy, the truth is, it’s not as unattainable for the average person as you might think.
Art is considered to be an alternative investment, something other than the traditional investments of stocks, bonds, and cash. And because art is a unique purchase, there are a variety of ways to approach it.
“There are several ways to think about art as an investment. You can go the passive route by buying what you love and assuming that some of it will appreciate over time, and if not, oh well because you’ve enjoyed living with it. Alternatively, you can be proactive by building a knowledge base, studying the market, examining current trends and trying to anticipate future trends, then make your purchases strategically. You can save up for a few expensive pieces from well established artists, or put your money into many inexpensive pieces from early career up-and-coming artists to see who does well over time,” says Phoebe Millerwhite, an art consultant and professional.
But where do you get started? The art world can seem like an intimidating place to an outsider. While it can take time to understand exactly how to go about purchasing a piece of art, and what the investment process will be like, there are several things you can do to become an informed investor — which is what you always want to be, no matter the asset. Here’s everything you need to know to dive in.
How do art investments work, and how do I get started?
Investing in an art can be a fairly straightforward process if you know what you are after. It consists of you finding a piece of art you want to buy, purchasing it, then holding onto it over an extended period of time so it will hopefully go up in value, and then can be sold for more money. The basic principles of investing in the stock market are the same when it comes to art––you want to find a piece that will appreciate value over time. But of course that’s easier said than done.
First you’ll need to familiarize yourself with the art market, figure out what kind of piece you’re after, and do your research on any artist that piques your interest. It may be our first inclination to gravitate towards well-known artists like Jean Michelle Basquiat, Jackson Pollock, or Banksy. These artists are the “blue chip” stocks in the art world, and their work can fetch millions of dollars at auction. But the truth is, when you’re just getting started, you’ll need to look at lesser known artists who have potential. Ideally, you’ll invest in art not just for the money-making potential, but because you love a particular artist.
At the same time you’re doing your homework on how much you want to spend on the piece, you’ll also need to research how much you want to spend. If an artist you love sells their paintings for $5,000, but you only have $3,000 to invest, you’ll need to decide if you want to wait and save up for a piece of their work, or look at similar, less-expensive artists on the market.
“Start with what you’re interested in, be it portraiture, photography, sculpture or street art, start there and then research that market. If you need to find out what you’re interested in, go to some museums or look around online and see what’s out there and what is interesting to you, bright colors vs. black and white, representative vs. more abstract,” notes Alexis Hyde, an LA-based art advisor and curator.
How Much Can I Earn?
The truth is, it’s extremely possible that you’ll take a gamble on a lesser-known artist, invest a few thousand dollars, and that artist will never become popular enough for your investment to mature. This is why it’s so important to invest in art that you love — you’ll want to find something that you will enjoy looking at, because chances are, it might not be something you’ll be able to sell for a profit.
However, some investments in art can yield a healthy profit when sold. According to a report from Citi Global Perspectives & Solutions from 2020, art investments had an annual return rate of 8.3% from 1985-2020. Your possible profits hinge entirely on the market for a particular artist, which is determined by their overall reputation, the demand for the work, and the overall economy, to name a few.
When people buy art, it’s usually as a long term investment — it’s highly unusual for someone to make a purchase only to sell it again months later. It’s meant to be held onto over time, which is why any amount you invest in art can’t be money that you’ll need back in the near future, or need to depend on receiving back in a certain time frame. The last thing you want is to be forced to sell your work of art in a few years time, at a much lower valuation than you believe you could get if you were able to hang onto it for a decade or more. Anyone investing in art should understand that you won’t see a penny of the money you put into the original purchase until you find a new buyer for the art.
How Much Money Do I Need To Invest?
You can start with as little as $50-$1,000+ to begin your investment in the art world. But how much you need hinges entirely on the kind of work you want to buy. If you’re not interested in having a piece of art in your home, and you’re just interested in investing in the asset class of art in order to see a return on your investment, you can also consider fractional art investing, wherein a group of people buy a portion or fraction of an art work. Popular platforms for investing fractionally include WithVincent, and Masterworks, a company that just raised $110 million and enables people to easily purchase shares of physical artwork. (And in the world of NFTs, “physical” artwork is an important distinction.) NFTs are a new digital art form that you can read more about here.
Where Do I look?
To find art for purchase, you can look at major galleries, auction houses, art fairs, and local artists — even eBay or countless other dedicated art auction sites, like Artsy or Artnet. It can all be a lot to take in.
If you’re looking to support an artist who is brand new to the scene, you can check out local Master of Fine Arts programs in your area, Millerwhite recommends. You can typically see their work as part of end-of-year exhibitions and sales, allowing you to get the jump on newer artists who may have a big career later.
You can also always go the auction house route, which can help you gain access to different forms and styles of art in one excursion. Purchasing from galleries and art fairs is also an option, from well-known fairs such as The European Art Fair, The Armory Show, Frieze, Art Basel, Art Basel Miami, and others. These shows sometimes allow you a chance to meet the artists, talk to people in the art world, and make connections.
Of course there’s also social media — countless people have found artists they love via Instagram, TikTok and more. Social media is increasingly becoming the #1 place artists turn to in order to be seen and heard, and as a result it’s now a great place for would-be investors to discover the next Georgia O’Keeffe.
Payments + Records
Most galleries will take a payment plan, explains Hyde. “There are even services, like ArtMoney, set up to create a payment plan for you. When you start to think about your purchases in more digestible installments, the hurdle to get in is much lower,” Hyde says.
Whenever you make a purchase, make sure you keep detailed records. This includes all invoices and receipts showing where you bought the work of art and how much you paid, as well as records on the piece of art itself. When you are dealing with an auction house they will often provide you with something called a “provenance” that establishes any previous ownership of the artwork, plus all other relevant details on the life of the work. All of these records ensure you’ll have a smooth sale of your artwork in future, and buyers will trust that your piece is the authentic work of art that you say it is!
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