Given the current economic uncertainty, many are reluctant to invest in traditional asset classes such as real estate. This has led to more and more people trying to diversify their portfolios to mitigate these precarious times.
The art market is not correlated to stocks or bonds and tends to remain stable regardless of how financial markets develop. Art is a value-preserving asset class, making it a powerful form of alternative investment, consistently delivering an average return of 7.6%. Research by Deloitte confirms this: 85% of wealth managers recommend including art in a balanced investment portfolio.
Despite this, many potential investors still find the art world a bit intimidating and aren’t sure where to start when it comes to making their first investment in fine art. If you’re interested in using this alternative asset to diversify your portfolio, here are five key pointers to get you started.
1. Dive into the market
If you want to make the most of a potential art investment, it’s important to take stock of emerging trends. These tend to be consumer-oriented, with collectors, galleries and auction houses all shaping what will be the next big thing. As such, delving into the art world to spot evolving trends and where the interest in the market is currently is invaluable.
Visiting museums, galleries and art fairs will help you make connections within the community and learn about the type of art you are considering investing in, as well as other resources such as reference books and magazines. The digital transformation of the art world, accelerated by the events of the pandemic, is also providing many opportunities to learn about and view art that you might not otherwise have access to, with online communities making it easier to connect with fellow artists to mesh ball.
2. Set a budget
It is not necessary to have millions available to invest in original art, but it is highly advisable to set a realistic budget and set a maximum amount that you are willing to spend.
In the heat of an auction environment it could be all too tempting to overspend, so setting and sticking to that budget is important to getting the most out of a potential investment. This allows you to focus on works that fall within your set price range, allowing you to conduct more relevant research so you can invest with confidence.
3. Diversify into different mediums
When it comes to fine arts, many people automatically think of paintings, but there are a number of different mediums that offer good investment potential. The price of artworks has traditionally depended on the materials and mediums they use, and this can be used to your advantage to purchase an original piece at an affordable price.
Collectibles such as limited edition prints, for example, are a great way to start your collection and represent a way for younger collectors and those on a more modest budget to break into the investment scene without breaking the bank. Fine art editions such as etchings and lithographs offer an affordable way to access promising artists without the prohibitive price tag of an original work, and as the artist’s reputation grows, so does the value of the print.
This media is also cheaper from a maintenance standpoint, making it a more convenient investment for those just starting out, as it doesn’t involve the sometimes high costs of restoration and maintenance that could depreciate an original work.
4. Quality over quantity
It is highly advisable to make the quality of the work one of your top priorities when selecting a potential investment. The condition of a work of art, even one of great names, will inevitably be a major factor in determining value and, if damaged, will command a lower price than in new condition.
When choosing an investment property, consider the materials used, as those that use quality materials are far more likely to maintain their condition. Likewise, you should always consider how well the piece is aging and consider potential maintenance costs that will affect the profit to be made from the piece. It is often beneficial to consult an art specialist on these matters as they can best advise you before investing.
5. Maintain your investment
Like any valuable object, art needs to be properly cared for. Because it is a long-term investment, it is vitally important to preserve the value of the works you are investing in and avoid risks that could compromise the longevity and ultimately the value of a particular piece.
Be aware of the specific care needs of the different media in your collection to keep them in good condition and avoid damage from improper care. Different mediums, of course, have different maintenance requirements, and while a wooden sculpture may require minimal care, an oil painting has more specialized maintenance requirements.
When it comes to preserving the integrity of the pieces in your collection, ensuring that they are stored or displayed in an appropriate environment is also of great importance. Avoid extreme or frequent temperature changes, direct sunlight and humidity. Getting this wrong can easily result in damage to the piece and costly repairs that affect returns later.
While investing in art is certainly not as intimidating as it might first sound, there are certain key elements to keep in mind to maximize potential returns. If you’re looking to start investing in original art but are still unsure of how to get started, consider booking a consultation with a specialist who can best advise you so you can invest with confidence.
Steven Sulley is an art consultant and founder of Soho-based art studio Woodbury House