Art investment

Recent years showed an increase in the number of business and academic publication that observe art from a market-financial perspective.

Record transactions achieved in auctions, continued market growth along with new market evolvements contributed to the rise in the interest of art as an investment asset.

The past decade showed tremendous increase in market transparency in the form of accessible online price databases as well as various statistical data tools becoming available for the general public in the form of periodical market reports and various indexes specifically developed for the art market.

Art investment has become part of corporate business strategy as well as individual collectors.

Introduction

Soaring record sales, high profile art fairs, increase of market transparency along with the tremendous amount of money involved in the art field worldwide, attract more and more attention to the economic aspect of art specially the feasibility of art being a measurable investment asset.

Currently there is no single answer as to whether art’s correlation with other financial assets exits and whether it makes a good diversification tool in investment portfolios. .

While there is a clear appreciation in value for leading artists, and well thought off purchases have shown a positive rate in return, it is difficult to make a clear case for the overall art market or for specific segments only.

Challenges

Investing in art can be realized as a profitable alternative, but it can also be extremely risky.

The art world has some inherited characteristics that should be taken into consideration when purchasing art for investment; the art market is illiquid, unregulated, opaque and high transaction costs can wipe out any profits.

Money invested in art is at the mercy of changing public taste and trends that can artificially inflate prices as well as handful gate keepers who control prices, supply and demand.

Despite recent augmented interest in art investment, the soaring record sales and obvious market growth, public’s decisions regarding art, still lack financial tools and methodology to estimate the rentability of the investment.

Advantages

A carefully planned art portfolio with hand picked items can retain value over time and even yield healthy returns to its owner.

With knowledge, research, practice and discernment, it is possible to mitigate the inherited obscurity and reduce the risk involved in this investment.

The high end of the market is immune to public impuls and short-lived trends.

The art market has its blue-chip and well established artists that will always find stable market demand though the entry point is higher.

The clear advantage of investing in carefully planned collection is that it survives economic downturn.

Methodology

Investing in art is a long term process. Buying art with a hope for a quick profit will most likely cause loss of money. One should love the art they buy especially if they intend to present it. One should enjoy the process of researching an artist and study their art work well.

Extensive research should be made prior to investing financially in an art piece.. One should research the artist’s main markets, history in terms of performance, demand and popularity, and finally the desired art piece itself.

It is essential to dig deep in order to understand the artist’s history, how they progressed over the years and preformed financially in their main markets over the years.

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