The main benefits of investing in art are a sense of personal satisfaction and the financial benefit of an artwork’s appreciation in value over time. Investing in art also lets collectors see and enjoy their investments daily in a way that isn’t available to those whose investments are in stocks and bonds. As a financial investment, good art often appreciates independent of traditional economic measures like inflation or securities market indexes.
Even though art investments often appreciate slowly in value, they don’t often lose value like their traditional counterparts in the equities markets. Also unlike more traditional investments, there’s no art investment equivalent to a company’s going out of business. An artist’s output may be steady or sporadic, but immediately becomes finite upon death or retirement, often leading to dramatic increases in value. Another significant difference between investing in art and traditional investing is the duration of the investment. A stock or bond held for more than a year is considered a long-term investment; artwork is more commonly held for decades before being sold. Like traditional investing, the art world has its share of hucksters and scam artists; investors in both fields should thoroughly research their purchases, enlisting professional help if necessary, to ensure their legitimacy.
When investing in art is done strictly for financial benefits, though, it has its drawbacks. For example, art that’s already been recognized as being of investment quality can be very expensive, and should be purchased only after the investor’s financial security has been more or less guaranteed with other more traditional investments. While it’s very possible to buy art inexpensively from new artists and hope its value appreciates over time, if the artist never gains favor with critics or the art-buying public, the works’ appreciation may not match that of stocks and bonds or even keep up with inflation. Another drawback is that artwork is illiquid and can’t be sold as easily as traditional investments like stocks and bonds. The sale of investment-grade artwork often requires the services of a dealer or an auction house to realize full value, thus diminishing investor’s actual return.
Art investment can provide an investor with other very satisfying benefits. For example, individual works can be loaned to museums, enhancing the investor’s reputation and prestige. Astute investors, in fact, often exploit every opportunity to show their art in as many ways as possible, thus continually promoting the artists and potentially enhancing the value of their collection. Investors who specialize in particular artists may find themselves routinely invited to exhibits of their work. Galleries do this to promote sales, while the investors enjoy the opportunity to meet the artist and mingle with fellow aficionados.
Like any other type of investing, investing in art requires some expertise if it’s to be successful. It’s easy enough to buy a sculpture, oil painting or photograph that one likes, but that’s not the same as buying works primarily for their potential for increasing in value over time. Many art investors routinely consult with art investment professionals before making any art investment purchases.
