Investing in art can be one of the most enjoyable investments an investor can make. After all, artwork holds intrinsic value simply in its appearance, and sticking a piece of artwork behind glass can ensure that the investor can enjoy the piece often.
However, investing in art isn't for everyone. Art can only carry value as an investment if there's a market for a piece, which can make counting on a valuable piece of art a very risky strategy if you don't have the time to wait for the right time to sell. If you want to invest in art, here are a few things you need to know.
Art Investments Take Time
When you invest in artwork, you shouldn't expect to sell your piece for several years. Unless the artist in particular is having a moment, you can expect to hold a piece for 10 years before it gains enough value to be worth selling.
In this sense, artwork is a bit like a more risky version of a bond investment. When you make the purchase, you do so on the belief that it will be worth more the longer you hold onto it. However, unlike bonds, there is no guaranteed amount that your piece will sell for when the time comes.
Art Can Be Volatile
There's no such thing as timing the market when you're investing in art. All you can do is buy a piece and keep it in mint condition for the length of the time that it's in your possession. You'll never know in advance when an artist becomes popular, or if a certain piece finds itself in short supply. But if you take care of your artwork, you can be ready to pounce on the right offer.
Art Can Be Forged
This is the biggest danger of an art investment: forgery is always a possibility. Before you make an investment in anyone's artwork, be sure you're either dealing with the artist directly or a reputable art dealer. This is meant to protect you and ensure that what you're investing in is the real deal.
Art Doesn't Guarantee Returns
In fact, investing in art is often not the way to go if you're looking to beat the market. Over the past 50 years, studies show that the All Art Index's return of 7.9% per year was slightly less than the 9.7% return of the S&P 500.
That's why you should only invest in art you love and only invest what you can lose. If you invest in art you love and it doesn't sell, at least you can still enjoy the piece. If you don't love the piece, you'd have lost your money with no tangible asset for it -- the worst of all worlds.