The business of art collecting, an alternative investment idea
An investment research report by Smartpis states: "The art market rebounded after the last recession, even faster than traditional investments. High net worth individuals (HNWIs) with a portfolio diversified into art assets seem to be less affected by the financial crisis. [...] The Art Market, particularly over the past 18 years, can be considered a safe haven in the face of economic and financial turbulence, generating substantial and recurring yields."
Investing real money in evanescent financial entities such as stocks or forex usually doesn't worth the stress. They have no beauty, no perfume, but they leave you with a bitter taste when they drop 60% without a warning (or a rational cause). I was one of the many people who learned this the hard way during the 2008 financial crisis.
So I thought I rather buy something that is not only a financial investment but I could also enjoy owning it: put it on my shelf, hang it on my wall, maybe wear it, but most of all, it could bring me great feelings and be a low-risk investment!
This is exactly what artworks can give to a collector: the pride of ownership with the taste of its history and aesthetic pleasure. And the great thing is that all these good feelings come with a financial return... if you know what to look for! Navigating the art world however can be difficult at first, so let's look at the main factors that affect the value of an artwork.
4 factors art and antique investors consider when investing
- Artistic Value: I find this to be the most difficult one to follow and predict. The artistic value is subject to the volatile trends of the art market. At Lot-Art we use big data market analytics to understand the trends. If you “happen to” own the right piece at the right time, you will truly enjoy its financial benefits. And if it's not the right time, then its time may still come! Just think about Van Gogh or Modigliani, completely misunderstood during their lifetime by contemporary buyers and worth millions just after a few years from their death. Contemporary art enjoys the highest potential returns in artistic value, while old masters and antiquities are more stable in price. So if you are aiming at high returns indulge in purchasing contemporary artists which you sincerely like. I still regret I did not buy the Yakusa picture by the famous Japanese photographer ARAKI Nobuyoshi, its value in auction quickly raised from $7,800 in 2007 to $57,000 in 2016. Did your stocks perform the same?!
- Historical Value: Ideally, the value of an artwork increases over time (the older the better) as age is directly related to scarcity, and scarcity relates to price. But historical value has more to do with provenience: a painting that has been hanging for centuries in the house of a noble family may give you an extra flavor when you hang it on yours. Or imagine the incredible value that a daily object like a pen or a small ring can reach if it has belonged to a famous historical person. It is highly recommended to check the previous sale prices of the item you are buying.
- Geographical Arbitrage: The monetary worth of an artwork can be differently perceived from one region of the World to another. This is usually because of the differences in culture, history, religion, artistic taste and how well known is an artist. A historical print of the view of New York will be more expensive in the USA than in a small auction house in France..
- Collective Value: A series of related items together is worth more than each single object alone. This is why being an art collector can be both fun and profitable. You don't need to have hundreds of items. Even 2 related works can make a great price synergy. For example, at "TEFAF - Maastricht" I have spotted a beautiful diptych of the first and second edition of a print from the a series of Piranesi. Each print would be less then €15,000 alone, but the two toghether was sold for €40,000. The pleasure of spotting the changes made by the artist between the two versions is the cherry on top. So when it comes to collective value 1+1 > 2 and this is another big opportunity of the art and antique business.
Art collecting is an investment and follows similar rules to the financial market, but it is less volatile in economic value, and it's just more rewarding in terms of feelings. If you well diversify your investment into art, jewellery and antiquities, you will have a very solid low-risk portfolio.
One could argue that artworks being material assets are not liquid but they are fundamentally wrong: if for stocks and currencies there are the financial markets, then for artworks there are the auction houses. Auctions are the best source of items to any collector looking for alternative investment opportunities.
Why professionals use Lot-Art daily to find artworks and collection items:
- Lot-Art.com is currently the most advanced auction searching portal online. It was developed by art collectors on collectors’ needs. Offering the most comprehensive and up to date list of auction sales worldwide, Lot-Art allows saving precious time to any eclectic art colletor interested in a wide range of artists, brands and collection items.
- Its auction price database is one of the best source of historical prices. It lists more then 36 million auction results recorded globally since 2016, providing a very useful tool to get an idea about the current value of an artwork or luxury collectible to be purchased at auction.
- Its advanced market trend analytics feature provides an overview of the average price, liquidity, sell-through rate and other key indicators for any asset. The AI driven processing of the art and wristwatch categories is one if the flagship features used by professional dealers and art galleries too.
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