Despite economic turbulence created by the COVID-19 pandemic, the fine art market continues to boom. Savvy investors are diversifying their portfolios, building wealth via a variety of different investments, including alternative assets. Buying stocks and bonds can certainly be an effective way of accumulating wealth, but with so many other options available, they are not the only route, even for those with a relatively modest investment fund.
Once regarded as the arena of the wealthy elite, art collecting is becoming an increasingly popular mode of asset diversification. Not only does work by revered artists increase in value over time, but investors have something far more attractive to hang on their walls than a collection of stock certificates.
The COVID-19 pandemic undeniably posed unique challenges in the art market, as in-person auctions were canceled due to social distancing policies in countries all over the world. As a result of stay-at-home orders and lockdowns, galleries and auction houses were forced to move their operations online, triggering a 15.1 percent increase in the contemporary art market.
Throughout the pandemic, not only have existing collectors sought to add to their collection, but new buyers have entered the market, marking the start of a new trend that bodes well for the future of art collecting.
As with stocks and shares, the lure of vast returns can be overinflated. Nevertheless, it is possible to generate positive returns by investing in art, particularly for those who are selective, hold a diverse collection, and look at art collecting as a platform for building long-term wealth, with returns comparable to those generated by bonds.
It seems that every day another auction house is boasting a new record-high price. It is important to remember that although the art market can show large ROIs in boom times, art can also plummet in value, particularly during periods of recession. As with any mode of investment, it is crucial to undertake careful research going beyond your comfort zone. The art market is sometimes fickle and has zero guarantees of profitability, but with enough research and forethought, purchasing a work of art might not only bring you pleasure but prove a valuable investment down the line.
Aspects to consider before investing in art
If you enjoy art and know a good deal about it, it is entirely possible to turn that knowledge into an asset. If you do not have an appreciation of art for its own sake, there are far safer routes to building wealth. However, there are some criteria to take into consideration that could stack the odds in your favor.
Prints are an economical way of owning an image you love without frittering away your life savings. Giclées are high-end copies of original paintings. Printed on fine paper or canvas, these machine-printed mimics often have a clarity and color to rival the original, yet they are available at a fraction of the original work’s price. Appearance, however, is where the similarity ends.
Although a giclée may be an affordable way of owning an image you love, it is not a good buy from an investment perspective. Rare prints can be valuable, particularly limited editions, but even the best giclées will be worth only a fraction of the price of the original, even those touted as “archival” or “museum quality.”
Many museums generate income by selling giclée versions of masterpieces. They may be pleasing to the eye, and even the soul, but they will not generate future revenue.
Purchasing works by emerging artists can be an astute investment. However, it can be challenging for collectors to distinguish between a one-hit-wonder and an artist that holds long-term promise.
Prudent art investors consider aesthetic pleasure first and fiscal benefits second. Buyers should seek out original works in excellent condition and obtain an appraisal for pricier investments. Providence is a crucial factor in terms of determining a work of art’s value.
Art can be a great investment, but there are inherent risks
Investing in art enables you to surround yourself with works you truly love, generating a profit when you part with them, in an ideal world. Nevertheless, art collecting is a somewhat precarious platform for generating wealth. It’s best to build a diverse, well-rounded portfolio of investments, with art accounting for just a small percentage.
If a promising artist goes on to have a successful career, the value of their work skyrockets. This is never guaranteed though, and many promising artists simply disappear into obscurity.
It is therefore important to invest sums you can comfortably afford to protect against depreciation as well as possible storage and maintenance costs.