Since the dawn of human history, artists have created art. Once artists created their art, other people started to want to purchase it. In the early days, art was traded for weapons or workers, gold trinkets, or jewels. Nowadays, original pieces of art are sold for anywhere from a few to millions of dollars.
This makes people think art investment is unattainable, as it seems like a rich person’s game. However, investing in art has never been easier or more accessible. Nowadays, it is quite easy to get started in investing in art and slowly build your portfolio over time. In this article, we are going to discuss exactly this, while offering a few reasons as to why collecting art is such a smart idea in the first place. Read on to find out everything you need to know about investing in art and how to start now.
Art Is Valuable
Obviously, as you know, art can be extremely valuable, which is why it’s an attractive investment. Art is valued by specialists who often consider the age and size of the art alongside the quality of the piece and, of course, who the artist is. Original paintings from master painters (pre-1800s) sell for millions, with the most expensive having sold for around $450 million.
Of course, there is a secondary value to a private art collector and that is the piece’s personal value, what it means to the collector. Some things are more valuable than money, and many collectors value pieces by their sentimental value as opposed to any potential financial return on the piece. In this article, we’ll mostly focus on financial rewards. Though, it is of course always nice to purchase pieces you love to look at as well as value highly!
Art Is Finite
The interesting thing about art is that it is finite. By saying this, we mean that there is very rarely more than one original of a particular painting or sculpture, while a single artist will only release a certain amount of work in their lifetime. This makes each piece more sought after, driving values up based on a simple supply vs demand ratio. Copies and prints of paintings are often made but sell for pennies in comparison to their original counterparts.
Starting In Shares
There is a new way of purchasing and investing in art: shares. Nowadays, platforms like Masterworks art allow customers to buy shares in pieces of art. This works in much the same way as investing in shares of a company. You are buying part of the piece of art, ownership of that percentage, in the hope it makes you money in the future – more on that later. This allows people with less money than a classic art collector to get involved in the process of investing in art, making it far more affordable and accessible to people who may never have had the chance to do so before.
Benefits Of Starting Small
When it comes to investing, there’s never too small an amount to invest. Many people think that it’s not worth buying shares of companies unless you have a huge amount of capital to start with, this is not the case. Much like with art, starting small is no problem. Even if you buy 1/1000thof a piece of art, you have begun your investing journey. The hope is that a small investment could become valuable and lead to an increase in wealth in the future, it is not a short term game.
What If It Gets Sold?
The crucial part of investing in art this way is that one day the intention is to sell that piece of art as a profit. The platform that you have invested through will have a strategy for an exit price in the hope they can sell it for more than what all the individual investors have paid into the piece. This is where you will hope to see a return on your investment, giving you a nice profit against what you initially invested.
Investing Over Time
In shares of art, much like in shares of a company, investments aim to gain value over time. As you earn on your investments, you can reinvest into bigger shares of art – should you wish to. Buying larger shares can lead to larger returns. Much like compounding interest in stocks, you can slowly increase your percentages and increase your profits.
Curating A Collection
If your long-term goal is to get to the point where you can purchase whole pieces of art and begin to curate your own collection, shares are a great way to start. You can start to learn about the market and different values of art. You can also start to decide which pieces you like the best and would like to take care of in your own collection. Plus, you will have gained a basic idea of how much arts value can increase over time.
Risk Vs Reward
Of course, with all investments, there is some risk involved. When buying smaller shares, there is obviously less risk than when buying much larger shares or entire pieces of art. The risk lies in art being damaged or the value suddenly decreasing due to any number of surprise factors. This, again, is very similar to investing in business, currencies, or any investments. Due to the reasons we have already discussed such as the scarcity of art, how it is never accurately copied, and how artists names often stay relevant for many years, the hope is that investing in art is relatively low-risk. It is advisable to always do your own research and only spend money on investments that you can afford to lose.
As you can see, art is an investment game that is worth getting involved in, especially now that it is so easy for beginner investors to have a go. As we have mentioned, though, always do your research on artists, art, or any other investment. Plus, make sure you never overspend in the hope of making short-term gains, that is a risky game to play!