The notorious opacity of the art sector can be an intimidating place for the beginner investor. The art world has historically thrived on a sense of exclusivity and investors of high-end pieces are often assured anonymity over their purchases. For investors new to the art world, this can be overwhelming and cause the beginner to doubt whether this is a market for them. However, The Art Market’s 2019 report stated that sales in the global art market in 2018 reached $67.4 billion, up 6% year-on-year. Despite Brexit worries, the report acknowledges that the UK had a relatively strong year of sales in 2018, with values rising 8% to just under £14billion. With the right support and knowledge base, even the newest investor can make sizeable gains in this flourishing sector – and has every right to do so. We present a beginner’s guide to making successful initial investments in art, including key tips on research, purchase prices and the type of art that will make maximum returns.
Decide your investment value
A key consideration for any art investor is how much money to invest. Start by deciding on a budget that feels comfortable, factoring in possible storage and maintenance costs to keep your investment in prime condition. Successful art investors are in it for the long haul, so consider how feasible it is to keep that sum of money invested in the piece before its sale. As the latest Deloitte 2019 report shows that pieces kept for 10 years enjoyed more sizeable gains than those that were quickly resold, investors need to resist the urge to cash in too early.
Consider whether to buy an original or reproduction piece
The level of investment that a beginner is willing or able to make has an inevitable impact on the level of realistic return. Original pieces of art are what most investors purchase and have the potential to increase in value dramatically. The purchase of an original Rothko is likely to skyrocket in value but few beginner investors can afford the multimillion-pound price tag. The purchase of an original piece necessitates a higher initial outlay, but the long-term investment success makes this an attractive proposition for many. However, for those making their first forays into art investment, the high cost of purchasing an original is a gamble that many feel unsure about making without a knowledge base to guide their decision. The popularity of Giclée has helped put the work of acclaimed artists in the reach of more people. A Giclée is a high-quality reproduction print that can be found everywhere, from local galleries to world-renown museums. Despite the museum quality of these pieces, the investor needs to be aware that these are not original works and are unlikely to appreciate at the same rate as the original. However, savvy investors see the potential of a Limited Edition Giclée to make sizeable gains. Because of its high quality and relative rarity, a Limited Edition Giclée is valuable from its initial printing. Added to this, Giclée prints also become more valuable over time as the artist gains greater recognition and the edition of the print sells out. Selecting a print from a relatively low run and a finite amount has the greatest potential to increase in worth. We at Smith & Partner recommend an initial investment of around £1000 on 2 to 3 pieces of Limited Edition Fine Art prints to begin a collection.
Increase your knowledge – and find someone that has more
The lack of knowledge about art can be a barrier to making successful investments, so don’t take this risk. Research artists and their work closely. Artists with a back story or current buzz around them make go-to investment purchases. Find out if artists have won awards or gained recognition for their work, and research whether their pieces are included in any museums or famous collections worldwide. Learn about their education, background, current or past commissions and find out how their work has fared at auction. Tools like the Magnus app allows the investor to find historical price information for a piece in within seconds. However, your own research is no substitute for expert advice. The knowledge of an art consultant’s years of experience and education can be the difference between financial gain and loss, so trust in them to offer guidance that will most likely reap the greatest results. Few people have the time or inclination to become an art virtuoso overnight, so gain an initial understanding and put the hard work in the hands of the professionals.
The typical art purchase is a decision made from the heart. A piece will resonate with the buyer, edifying them in ways they are often unable to articulate, and the pleasure of the purchase is enduring. Art as an investment requires a different mindset. Even the most passionate art lover will need to detach from their personal appreciation of art if they want to make truly financial gains. Purchasers must think like investors rather than consumers of the product themselves if they want to see a good return on investment. Of course, finding a piece you like yourself that is also a canny investment is truly a win-win scenario.
We believe the beginner investor has the potential to make sizeable gains in the art industry if they are able to leave their own tastes at the door and listen to the experts. Finding the right gallery who can provide a well-curated, diverse choice of works is crucial. Chosen wisely, the relative immunity of art from the fluctuations of the financial industry makes an intelligent inclusion to a diverse financial portfolio.