A Guide to Investing In Art – LIFESTYLE BY PS icon

A Guide to Investing In Art

Taking a chance on new artists can be a good idea - but it also can be risky.  As competition for 'blue chip' artists increases, one noteworthy trend is that newer collectors are showing an interest in young artists, who might be more of a risk but also offer the potential to earn significant returns. 

Also, for collectors who have really small amounts of money to invest, it gives them a way into the investment market.

In the US, Heritage Auctions is nurturing this trend. Ed Beardsley, managing director and vice president of Heritage's Fine & Decorative Arts, says that it is more likely for younger collectors to purchase strong pieces by newer artists who curators have recommended to the auction house.

Ask questions

Be sure that you thoroughly understand what you are purchasing, along with any issues that might affect its value.  Ed Beardsley suggests that you call the auction house and speak to one of their specialists since they really know all of the ins and outs that are involved.

Beardsley adds that you should ask about the condition of the investment art for sale, since that will have a significant effect on the price.  Although online might seem distant, it is always possible to pick up the phone or email - and that is why they have specialists: to really get to know the collectors, answer any questions, and understand what they are looking for.

Purchase online

Online auctions will clearly play an increasingly essential role in the world art market. Artnet reports that currently, online auctions represent a fairly low percentage of total auctions (single digit), but it is estimated that it is growing more than 20% per year. 

There are key advantages that are bolstering this growth, including lack of seasonality (compared to traditional brick-and-mortar houses), fast turn-around, enhanced market liquidity, and low transaction costs.

Proceed carefully with repairs

Repairing damaged artwork isn't only an issue that the conservator has to deal with. Numerous art collectors are not aware that an artist might consider certain repairs to change the nature of their work to such an extent that they don't consider to be a piece of their art any longer. 

Due to this fact, Valarie Jonas, one of the partners at Meckler Bulger Tilson Marick & Pearson LLP, advises that the attitude that an artist has towards repairing her or his work should be taken into account when considering whether to purchase a work of art or not.

Get analytical

Services like Artprice and Artnet can be used to better understand the market. Track your favourite artists' performance and research new ways of measuring their investment potential.

There are various indices using different methods for measuring the performance of artists.  A simple and recent technique was developed by Arturo Cifuentes, a professor of finance, who in collaboration with Ventra Charlin, an applied statistician, devised the Artists Power Value (APV).

The value of art is basically treated by the APV metric in a similar way that real estate value is.  It divides price by area to measure its value.

A Guide to Investing In Art