Why Investing in Fine Art is Different than Investing in Traditional Asset Classes Why Investing in Fine Art is Different than Investing in Traditional Asset Classes

When an average person thinks about art, is probably taken straight to famous paintings such as the Mona Lisa. But what many people forget, is that art comes in numerous forms. Sculptures or photography, to name a few, can often be overlooked by beginners looking to get started with art investing. Google searches for “investing in art” hit a 12-month peak just after Salvatore Mundi’s sale in November at Christie’s for $450.3 million, suggesting that a new wave of investors may be circling the art market, which is already stacked with consultants and lawyers, who advise clients on how to approach fine art as an asset class.

Buying art is easy, but selling is hard!!

With more galleries, art fairs and online portals than ever before, spending money on art is easy. Buying art at auctions is also easy because anyone who passes a basic credit check can bid and the object goes to the highest bidder with no questions asked. But the ease of buying hides the challenges of selling. Galleries are typically reluctant to resell work they have already sold once, because they stand to make more money selling new work by that artist. Top auction houses want to sell proven names, so out-of-favor artists, or those whose careers have yet to take off, will not be considered.

 

Investment banker Huang Xiaoshuai and his wife Wei Mengyuan, chat in front of their newly acquired painting Fire by Chinese artist Zeng Fangzhi at Art Basel in Hong Kong. Photo by Anthony Wallace/AFP/Getty Images.

 

Stock and bond prices adjust constantly to reflect new information. Because information is so valuable, securities law makes it a crime to trade on material, nonpublic information. These rules do not apply to the lightly regulated art market comprised of private art galleries, individual collectors and artists. In fact, it’s rather the opposite: Knowledgeable insiders may trade their information to others in the hope of making a sale. Being an art market insider with access to important tips and whispers has always been, and will likely continue to be, an important determinant of returns.

For most investors, stocks and bonds are enough. But for some, the prospect of putting something wonderful on their walls that may also produce great financial rewards is a siren call leading them to consider putting a portion of their wealth into art. Before committing serious capital, investment-oriented new collectors need to understand and embrace the sharp differences that exist between the art market and more traditional asset classes.

Gallery owners will tell you that buying art is an emotional decision, but don’t fall for that line if you are thinking of it as an investment. Research any living artists who catch your eye. Learn about their education, their commissions and their exhibits.

 

Gig Posters, Image via independent.co.uk.

 

Visit museums, galleries and art institutions in your area regularly so you can recognise potential movers and shakers in your region. If you’re considering a piece by a renowned artist, get an appraisal. Look for quality, and don’t buy anything in bad condition. With a little effort, you may unearth a lost masterpiece that’s worth a million.

 

© ARTICLE FROM
Doug Woodham | artsy.net
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