Investing in art has been growing in popularity over the years. However, there are still a lot of misconceptions about it that mislead many potential investors.
Before you invest any of your wealth in art, you need to be clear about what you’re getting into – and what you can get out of it.
Types of Art
Art comes in many different shapes and sizes, and it isn’t enough to just choose to ‘invest in art’. Instead, you should be trying to figure out the type of art that you want to invest in, whether it is oil paintings, sculptures, photography, drawing, woodcrafts, or something else.
In addition to your personal preferences, you should view each type of art from the perspective of an investor. That means thinking about its current value, potential appreciation, and popularity.
Art Is Different From Normal Financial Assets
Although you can invest in art, you should always remember that it is very different from any other normal financial asset. For starters, you won’t earn ‘dividends’ in the form of cash.
Aside from the value of art does not fluctuate as much as financial assets do and is not as volatile. However, by that same token, there is no guarantee that the price will appreciate due to the fickle nature of the market.
If you want to predict whether or not the artwork is likely to appreciate in value, you need to understand the market well. That is not easy, and you will need to keep track of prices as well as immerse yourself in that world if you want to maintain your edge.
Be Aware of Hidden Costs
Aside from the price tag on art, there are a lot of other ‘hidden’ costs that you need to know about. Some of the more common hidden costs include:
- Hiring an art inspector to verify the piece is an original work.
- Maintenance costs include storing and keeping the art in good condition.
- Sale commissions and fees by art galleries, dealers, or auction houses.
- The tax that is typically 28% of gains but may vary if tax-saving strategies are used.
In short the profit that you make from your art when you eventually sell it may not be as high as you expected after you factor in all the hidden costs that are involved. To avoid that you should take them into account beforehand.
Don’t Fall for the Hype
One of the biggest mistakes newcomers make when investing in art is the buy into the hype. At times they may hear about an up and coming artist who is the ‘next big thing’, and decide to invest in it. However more often than not that approach is not going to pan out.
As a rule, you should try not to fall for the hype. Instead, you should always do your research and look into the price of the artwork, its potential value in the future, and whether or not its value may change based if the sentiments shift.
Hopefully, by this point, you should have a far better idea of what’s involved if you want to invest in art. Nowadays it is easy enough to buy original paintings online or other types of artwork too, but you should do your homework before you get to that point.
Keep in mind that if you do invest in art you aren’t just investing in is monetary value, but also the emotions you feel when you cast your eyes on it. At times that may be worth more than the price tag itself.