The Art of Investing in Art

Fine art can be a great way to expand your financial platform and build a solid investment for your future. But before rushing out to the nearest auction house or art gallery, it’s important to ask questions to assess your financial needs and set some realistic expectations. Just because you love art and the thrill of a good price haggle, it doesn’t necessarily mean that a payoff will happen right away (if at all). Here are a couple of things to consider:

Emotional vs. financial payoff

Acquiring an original work of art can be a great way to establish a family history and create cherished memories. More often than not, art collections begin as a way to mark major moments in life: birthdays, weddings, buying a house, etc. Thus, it’s easy to have some sentimental attachment with an art purchase. When the day comes for an appraisal or evaluation of your collection, keep in mind that sentimental value does not always equal financial value. Galleries, auction houses and appraisers evaluate art objectively; don’t be offended if the estimate or starting price is different from what you expected. The expert’s job is to set a realistic value that reflects the current demand of the art market.

Long term vs. short term

It is possible to make a short-term investment by purchasing and reselling your art for a quick profit. However, you need to keep one thing in mind: even if you have a solid buyer, the only factors that increase the value of fine art are time and demand. Note that the art market is just as unpredictable as any other; short-term investments can be incredibly risky for a quick payoff.  Thus, fine art is a more viable option for long-term investments because it has time to appreciate.

Why you are buying this?

This may seem like an obvious question, but before buying any piece, really think about the intention of your investment along with your financial goals. Is this a nest egg for retirement and you will need a profit? Will this be a family heirloom to pass from generation to generation? Do you intend to make it a charitable donation for a museum, library or academic institution? By asking these questions, you and your financial advisor can determine the type of purchase that is right for you.

Research, research and then research more

The Internet and social media can be very useful tools. Take time to look around to see what you can discover about art and artists that interest you. Also, ask for advice and look for reviews on all art-related inquiries. If you get some recommendations, search online for recent feedback before visiting any establishments in person. Don’t disregard art fairs; they are a great way to research new and upcoming artists. Look at websites for art galleries, auctions houses and appraisers and see what is available in your area. Doing this research not only provides insight on artists and individual pieces, but also helps determine if you should purchase locally or venture into the international market.

One thing to keep in mind, above all else, is to be sure you and your financial advisor are on the same page before diving into the world of fine art. There is no reason that art cannot simultaneously enrich your surroundings as well as your investment portfolio.