When you make a list of investment options, the usual options would be stocks, bonds, and mutual funds. But what about going out of the box and investing in something interesting like a piece of art?
An authentic piece of art can bring huge returns occasionally but is it a good idea to buy a painting for anything other than its aesthetic appeal?
Positives of Investing in the Booming Art Market:
Let us not be a pessimist, investing in art is not an absolute no-no as lots and lots of people are up for it. Every year there are multiple art sales and auctions going around and many investors are interested in this market aspect.
There is no doubt about the fact that genuine artwork produces a great return value when kept under a storage facility for speculation. But the ROI may take years as the art market is complex and not at all easy to speculate.
The Difficulties of Investing in Art Market:
A big problem with art investments is that there are just no valuation standards established yet. There are institutes and agencies which can do that for you but evaluating the exact price is still influenced by the demand and supply. Even if you invest in a good piece of art, you may fail to find a buyer for the piece.
Another issue which is daunting on the art market is that due to no proper regulation established, you may end up paying more for an art piece or get hold of a fake. There is also no investor protection due to the unregulated market hence you will have to trust the seller for the pricing and authenticity.
Remember the infamous incident of how the last known da Vinci painting Salvator Mundi had been purchased by a Russian oligarch, Dmitry Rybolovlev through his art dealer Bouvier who is also the owner of several Freeports and later learned that his art dealer had been fleecing steep profits from him. Rybolovlev ended up suing Bouvier and the auction house as well.
Art Investment is not Beneficial Over Other Investments:
Investing in art is not a bad idea but does it give you any advantage over traditional investment methods? Not really, understanding an art market is much more difficult than investing in a stock market and learning its trends. The return on investment in the art market is much higher than traditional investments. Also, there is no fixed duration when you can resell the painting for its best return value hence this unpredictability makes investing in art a bad retirement plan.
Let us not forget property insurance cost. Nowadays when individuals are bound to insure each and every item they pose getting the art insured would be on the priority list. You need to consider the cost of insuring the piece of art. It may be covered under your property insurance, but you need to verify that with your insurance companies policy.
The tax implications of investing in art are also higher than other investments like stocks which we forget to take into account. Yes, there are tax-free zones such as Freeports available to store the art to make it tax-free but then you will have to pay to rent a storage in the Freeport. Finally, you need to store the valuable art piece carefully if you wish to keep it under speculation and get good returns by auctioning it later.
Should You Invest in an Art?
So, is investing in art really a good option if it is only for the purpose of ROI? Art should not just be bought for investment but it should be bought only if you enjoy its aesthetic look as after all, that is why an art is made but if you still are stubborn upon investing in art, buy art pieces which others are interested in buying as well so that you can turn around and make money off it.
No matter the strategy, art is not a smart investment especially because it is the biggest unregulated market in the world. The art world is just unpredictable so spending all your investment on art pieces makes no sense. You can mix up your investments by buying few arts and sticking rest to stocks, bonds and mutual funds. This way your retirement funds would be secure.
Does that mean we are discouraging you from buying art? Not at all but do not buy an art just for the purpose of its return on investment but also because you enjoy the work.