Idle money is money that slowly devalues. What most people tend to do once they manage to put aside a nice sum, is to invest. As you probably know, there are many ways you can invest your savings these days.
You can do anything from investing in index funds to buying crypto. But the type of investing we’re interested in today is investing in art. If you’ve thought about securing your savings by purchasing an art piece or two, make sure to check out these 7 tips.
There’s a Whole World of Art Out There
If you’re not a certified connoisseur of fine arts, there’s a decent chance that your horizons aren’t that broad when it comes to different types of art. Sure, famous paintings made by even more famous painters are a great example of art that is worth investing in, but these are just a small fraction of what’s out there.
First thing first, figure out what kind of art you want to invest in. That will help you stay on track, and more importantly, help you narrow down your search altogether. If you don’t care about the art that much at all, go for the type of art that is practical for you to safeguard. Some people prefer paintings, others like exquisite pottery. The choice is yours and yours alone.
Decide On The Type of Investment
Contrary to popular belief, paying for the whole artwork and becoming a 1/1 owner of said artwork isn’t the only way to invest in art.
There are ways you can purchase a small (or large) fraction of a highly popular and rather expensive piece made by some of the greats. For example, Joy Wallet’s Masterworks review offers a great insight into this form of investing. On the other hand, those who want to own their art pieces needs to understand what that means and what kind of commitment such investments require.
At the end of the day, both of these approaches have their pros and cons. Owning an artwork means that you decide what happens to it, where it’s going to be displayed or how it’s going to be kept. On the other hand, investing in a popular art piece with 5 other people could actually bring you a better ROI depending on the piece and how it appreciates over time.
Vet Your Sources
Investing in art means that you’re essentially buying an item and hoping that it will appreciate over time. Purchasing an art piece from a seller is much riskier than investing in an index fund, however, the returns can also be much more attractive in the long run. The only issue here is that you can easily check the legitimacy of an index fund or a bank, especially if they’re among the more popular ones. You won’t always run into art salesmen or galleries with the same type of reputation.
The only way to cover your six is to do the legwork yourself. Vet every single seller that you might work with. Check their reputation among other art collectors, galleries, and institutions. Make sure that everything is up to snuff. If this is too much for you, maybe look into investing in an online business of some sort. That’s a much safer bet.
Prepare to Accept Risk
Investing in art has a romantic vibe to it — you’re purchasing a product of someone’s imagination, experience, and expertise that may or may not have been created long before you were born. However, with that romantic idea comes risk. Art is risky. The value of art isn’t dictated by some measurable metric. Instead, you are betting on the artist becoming more attractive to other art collectors.
You really need to sit down and ask yourself whether that’s something you’re alright with? Are you capable of taking such risks knowing full well that your gamble may not swing your way? The good thing is that there are ways of minimizing risk, just like with every other investment. It all comes down to how well you do your homework.
Diversify
Diversification is the ultimate tool for risk reduction. If you can reduce your exposure, you should — it’s that simple. Anticipating the future trends of a niche art market is fairly difficult. However, when anything turbulent happens in such a market, say with one artist, it has the potential to disrupt any adjoining markets or artists as well.
To prevent this from becoming an issue, it’s generally recommended that you diversify by investing in types of are that are far enough removed from each other.
It’s a Long Term Strategy
Investing in art won’t bring you any immediate gains. In fact, this form of investing is generally considered to be long-term investments. Trying to scalp the market of fine arts is a fool’s errand on a good day, a complete disaster on a bad one. Depending on what you’re holding, your daily chart (that usually doesn’t really exist), can vary wildly.
Volatile trends are nothing new in the world of art. Timing such a market is a borderline impossible task. The only real way to get a good ROI is to recognize a good piece, invest and hold long-term.
Sell if the Price Is Right
Last but not least, remember to treat your new piece of art as an investment. If a time comes when its current price puts you well into the green, sell it.
Getting emotionally attached to a piece of art is a very human thing to do, but not necessarily the most responsible thing to do. There will be times when your piece gets appraised at all-time high levels, and that’s the cue that it’s time for you to let go. Use the money you’ve just made to find other pieces and keep the cycle going.
It’s a Niche Game
Investing in art isn’t for everyone. That much is obvious. However, those who can successfully recognize a good opportunity, stick with it through thick and thin, will ultimately profit.
At the end of the day, you’ll want to gather as much info as you can on investing in art, talk to people who have experience in this field, and learn the ropes. Art investing is a pretty hands-on experience unless you hire a broker to do the legwork for you.