Start with some experience or interest in art. The best art investors do their research on the pieces of art that they buy, so someone with some education or interest in the art world is more likely to understand this niche market. As well as personal research, you will need to have contacts with people in the art world, such as auctioneers, gallery directors and dealers, who can give you good investment advice.
Understand the difference between art collectors, art investors and art speculators. You may confuse these three terms, if you are not careful. Each of them has a slightly different goal in mind when looking to buy art.
Art collectors do not buy art for investment purposes. They buy it to decorate and display in their home. Because they consider them to be an important part of their home or life, most art collectors have a hard time parting with pieces of their collection. While many collectors do end up selling some pieces of art, it may be done because of necessity. Collectors often loan their works out to museums and occasionally donate them to museums upon their death.
Art investors seek to diversify their portfolio with an art investment. Some investment firms put about two and a half to three percent of their investment money in art. They seek good advice and often buy paintings that are older and have been popular historically, such as paintings by the Old Masters. These investments are kept over decades, and sold off when the market is right, with the investor seeking to get a six to ten percent profit rise per year. These investments are also often made to be given as inheritance to future generations of the family. Art investment is often undertaken by the very wealthy.
Art speculators try to invest in art that they believe will appreciate in value. They aim to buy art at a low price from budding artists in the beginning of their careers. Then they hope to sell their work in 10 to 15 years when the artists are at the peak of their careers and people or collectors are willing to pay much more for their pieces. This is a type of investment that takes intimate involvement with the art world and liquidity in order to buy the art.
Figure out what you are willing to pay for art, before going to an auction house.Art investments should be no more than a small part of your investment portfolio, along with stocks, bonds, new businesses and more. Figure out what your range is before you begin to pick out potential pieces, and get advice from investors and art dealers.
Buying Fine Art
Pay attention to what schools of art are selling well, and which are down. Study the Mei Moses Fine Art Index to get a firm grasp of the art market today. Although they cannot predict what will be popular in the future, they can tell you what art tends to keep its value and be a low-risk and what art has a more volatile market value.
Focus art investments on fine art paintings, rather than decorative art. While this is not an absolute rule to follow, paintings from successful artists tend to get better returns than sculpture and installation art.
Reach out to trusted auction houses and dealers when you are looking to buy art. Get all the information you can out of them before making a purchase. If you are going to buy at auction, be prepared to walk away if the price goes higher than your investment range.
Beware of art auctioneers or dealers that promise too high a return on paintings. In many ways, they are just like stock brokers and other financial investment firms, who may promise anything to get a sale. They should be found trustworthy before you buy anything, because ponzi schemes and art market bubbles are part of this investment landscape as well.
If you have never bought art in an auction environment before, you may want to seek advice about how it is done properly. You should study the auction booklet before hand, learn about secret buyers and how prices can quickly inflate. Most fine auction houses would be willing to teach you the basics if they see you as a serious investor.
Buy your investment art when you feel confident of its worth, its price and its ability to grow in value. Arrange for payment, shipping and insurance. Each piece of art should be insured and catalogued as part of your estate.
Study how art is properly stored. In order for an art investment to retain its value, it should be kept at low-humidity and avoid being marred. You may choose to hang it in your home, but you may want to get an art collector's advice about where to hang it and how to care for it.
Share this information with your children, if it is intended as an inheritance investment. They need to be well aware of how to take care of art, or they may lose money or ruin the painting entirely.
Have your art investments appraised occasionally. As well as keeping tabs on the art world to understand the rise and falls of certain schools of art, an appraiser can tell you how your investment is maturing. They may clue you in on when you have reached your desired profit.
Consider renting out your art investments. If the art you buy does not fit in your home, and you will only be storing it, research banks, hotels and other institutions that rent fine art on a rotating basis. You may be able to demand thousands of dollars per year for your art to hang in another building. Keep in mind you will need to make sure your art is covered by an insurance policy for loss or damage.
Make sure the renter provides insurance for your art. You should prepare a contract that stipulates the time allotted, the fee, the insurance and the shipment of your art.
Understand that selling an art investment can take time. Unless you employ an art dealer or auction house at the exact moment when the art is in high value, it can take years and thousands of dollars in fees to find the right buyer.