Nov 01, 2016

Investing in Art: Ten Expert Tips for Investing in Art

As the number of art investors continues to increase, fuelled by the huge growth in art fairs and online sales, we provide 10 top tips for new and existing art collectors.
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The art market has exploded in recent years, with the seemingly exponential increase in the number of art fairs and ways to buy art online. As a result, the number of people buying art as an investment has also increased greatly. No longer is art investment solely for the rich and powerful.

But art values can increase and decrease dramatically, particularly with contemporary art. Modern art investors need to consider these risks and act to make sure they invest wisely. We’ve compiled ten top tips to help ensure that art lovers get a good return on their investment:

1. Study the art market and history

Understanding the art market, the trends and the movements, both now and historically is essential. See a lot of shows, go to a lot of auctions, meet a lot of artists and galleries and ask a lot of questions. Get many opinions and speak to experts as much as you can. Making connections and understanding what you are buying in the context of the wider art world is the best way to become a successful art investor.

2. Understand the connections between artists and look out for the signs

The value of art by connected artists tends to increase and decrease together. A wise art investor understands how their collection is connected to the wider art world and looks out for movements in the market. For example, Banksy prices are likely to be heavily connected to other street artists, while artists like Andy Warhol will be connected to similar artists like Jean-Michel Basquiet.

3. Diversify your collection

Having an art collection with a theme you are passionate about can be rewarding. However, can make your art investment more susceptible to value changes. Just as Banksy prices will be linked to the price of other street artists, they will be more disconnected from art from other eras or styles. A well diversified art collection provides a more balanced risk for those looking to buy art as an investment.

4. Look across mediums

Just as diversifying your portfolio can reduce the risk of your art investment, diversifying into other mediums - whether decorative art or design, can balance your risk further.

5. Buy the best work you can afford

It’s not just the artist’s name that carries value, but the quality of the work as well. The difference in price between a marquee work and a bad work can be huge and it is often better to buy a great work from a lower value artist than a bad work from a great artist. Always go for the best you can afford.

6. Plan your art investment like you’re balancing a financial portfolio

This one may not be for everyone, but for those who are really looking at art as an investment, consider forecasting the likely value growth of your collection and potential purchases using data showing increases in value over time and the probability of future increases/ decreases to assess risk. Study auction results and prices at art fairs and exhibitions to understand the impact on the value of your collection.

7. Understand that the primary contemporary market for young artists is the riskiest area of art investment

The contemporary market for young artists carries the most risk. Many of those artists won’t ‘make it’ and the works may never be seen on the art market again. Of course, the chance of return can be much higher and the cost to buy a work can be much lower than more established artists. Understanding the market, visiting as many galleries as possible and making connections in the art world is the only real way to improve your chances. Diversifying and balancing with more established artists is also a good way to lower risk.

8. Store your art wisely

It’s surprising to see how much investment goes into an art collection and yet how little is invested in caring for and storing that art investment carefully. Be sure that you don’t become one of those art investors who regrets their casualness in this area!

9. Invest in art because you love it

Being an art investor because you love art and investing in art areas that you are passionate about is the best way to make sure that you will dedicate the time to learning and understanding the art you are purchasing. This passion comes out when talking to galleries and artists and will make you a better collector. Investing in art that increases in value is a good feeling, but investing in art that you never want to sell feels better.

10. Be aware of your passion when purchasing

Invest in art because you love it, but be aware of how your passion can impact decision making when you’re buying. Buying art that has failed to sell at exhibition, paying more than you should for an artist and not thinking strategically when looking at an artist you love can be the difference between a good return on your art investment and a huge loss.