The art market has become one of the hottest new investment crazes in recent years. But will art as investment really earn you a profit? Or is this new asset class mostly hype? You may think is art a good investment?
Art is a long-term investment
Profits from art won’t happen overnight. Experts recommend art investment for patient investors with a time window of 10 years or more, so think long term. Many art investors include paintings in their estate planning as assets to pass on to their descendants.
The art market follows rules of its own
One major perk of art as an asset is that its value doesn’t rise or decline with the stock market. Even if your stocks aren’t performing well, your art investment may be doing great—good news for the savvy investor who wants to diversify a portfolio and minimize risk. And ideally, though not always, art will continue appreciating in value over time.
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Art is risky
Every artwork is unique, and the art market has ups and downs just like any other market. Since it’s impossible to determine an artwork’s true value—a lot depends on the artist’s reputation and on the economy as a whole—you should be comfortable assuming some risks.
It should only be a small part of your portfolio
For most people, art will be only a small fraction of a well-rounded investment portfolio. You may profit, but you’re highly unlikely to get a huge payout from art alone. Don’t rely on an art investment for steady income. And don’t forget you’ll be paying taxes on any gains since the IRS considers art a collectible.
Art is Non-Liquid
It’s important to remember art is a non-liquid or liquid asset. This means it’s difficult to convert into cash right away. Liquid assets, like stocks, bonds, and savings accounts, can produce cash more easily.
With an eye for art and a willingness to take a little risk, a new or experienced investor can find the best art investments incredibly rewarding. Though it should only be part of your overall portfolio, art can round out other investments nicely.
At the end of the day, this venture decision really depends on your personal investment goals. If you want guaranteed returns on the money you invest in artwork, or if you don’t have much money to work with, you’re probably safer skipping the art houses and sticking to liquid assets. Brand new investors should also give their portfolio plenty of time to mature before taking the leap. Check the similar article on art investment.