Art as an Alternative Investment Avenue

Owning fine works of art can add an air of distinction to a home. However, there is more to owning expensive art that adding décor to a home. Some people collect valuable art pieces as a form of investment. Stocks and other investments do not always offer good returns, and many people are seeking alternative ways to diversify their investments. Individuals who choose to invest in art should get the advice of a professional art collector who can help them determine which art pieces are the most valuable and will hold their value as a form of investment.

Is art a wise investment?

Top art collectors sometimes pay hundreds of millions of dollars for masterpiece art work. Collectors who have millions of dollars to spend on art work are typically not buying them as an investment; however, they do it for other reasons such as prestige or a passion for art itself. Even so, millionaires who are not buying art solely for investment purposes still do not wish to see the value of their art decline.  While the return on investment for art is slightly lower than that of traditional investments such as stocks, it can still be a profitable investment item. According to some art experts and studies by the New York University’s Stern School of Business, stocks returned 10.9 percent on investment in contrast to art; which returned a 10.5 percent performance yearly. This study shows art to be a valuable form of investment to diversify a portfolio.

What gives art its value?

The rarity of an art work is what makes it intrinsically valuable. The more rare a work is, the more copies are made of it; and its value as an investment item increases. Copies are never as valuable as originals. However, some copies, especially copies that are given a certificate of authenticity, can also be of some value. Buying an authentic copy can be a way for those who cannot afford to buy a costly original to still enjoy having fine art in their homes.

Advantages to art as investment avenue

Investing in art is considered an alternative investment as opposed to traditional investments such as the stock market or investing in treasury bonds. It is an alternative investment form that can pay off with savvy investments. Art investment has often outperformed traditional investments in the past few decades. The key in making an art investment profitable, according to some art experts, is to invest in art long-term, 10 years or more, and to invest in top-quality art work.

Disadvantages of investing in art

One disadvantage for the investor is that art produces no steady stream of investment income as that which is possible with mutual funds or equities, except for those rare instances of loaning out a valuable piece of artwork to a museum for display. Prices for art fluctuate wildly, even more so than stock prices. Transaction costs for buying and selling art work can also be very high compared to other forms of investment. Once investors then purchase the art, the value cannot be guaranteed. The value of a work of art can depend upon erratic variables such as the public’s taste in art or short-lived trends in which art works are currently held at high value.

Using the services of an art investment advisor

For those who are not knowledgeable in art work, or which pieces may retain or increase their value; a wise decision would be to seek out a qualified art investment advisor. These advisors can research which types of art are selling well or increasing in value. They can also arrange sales, financing, and curatorial management. They will help the investor develop a focused strategy for purchasing art to diversity an investment portfolio by giving sound advice on buying and selling art.

Diversity is the key to a sound investment portfolio

A sound investment portfolio will include many traditional investments as well as alternative investments such as art. To get the best value, investors should seek out solid advice from a qualified art investment advisor who has access to many of the leading art brokerage firms and will know when and where the top art works will be sold.

Tips for purchasing art as an investment

Investors who wish to purchase fine art to add to their investment portfolio need to do their homework before making their purchases. The best advice is not to listen to the suggestions of gallery owners as to which art to purchase. Research the work of artists, both living and dead to find which work is of interest. Visit art galleries, art museums and exhibitions to get a feel for what types of art go for the best prices. Get an appraisal of any piece of artwork to be purchased and make sure it is in top condition. By doing some research, a collector may find a potential masterpiece that is being sold under its market value.

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