For millennia, art has been a desirable investment for wealthy people. Several hundred years ago, rich patrons provided the funds to enable artists to create their masterpieces. Without patrons who were willing to buy their paintings, famous artists like Rembrandt and Picasso would have struggled to pursue their passion.
Today, the art world has changed. Struggling artists can now market their work online and reach a far wider audience. Paintings with mass-market appeal are sold on the internet and you don’t need to be wealthy to afford beautiful prints and fine art. But, although fine art has a far broader appeal these days, it still has the potential to become a valuable investment.
The Scarcity Principle
Fine art falls into the same category of fine wine, antiques, and classics. By virtue of its scarcity, a fine painting has appeal, and therefore value. Not all art is worth money, of course. It often takes time for an artist to build a reputation. At the beginning of an artist’s career, he or she won’t be able to command high prices for their work. They might not be able to find a buyer at all!
If they have talent, however, and their work has appeal, buyers will soon be willing to pay more for a painting, print or sculpture. At nine-years-old, Kieron Williamson sold 24 paintings for a staggering $386,000. It took less than 15 minutes for red stickers to appear on every single painting in the exhibition. Kieron is not alone. There are other child prodigies out there who have captured the attention of investors and art lovers.
The question remains, though: is art a good investment?
Art is an asset and high-end investors consistently include fine art in their investment portfolios. Unlike stocks and shares, fine art is less susceptible to market forces and irrespective of what’s going on in the world, people still want to own beautiful paintings.
Art Investment Funds
Most ordinary people can’t afford to splash out on a Matisse or Monet, but they can invest in a fund that dips into the fine art market. In many ways, this is a sensible way to invest in fine art, as you are relying on the expertise of an experienced fund manager.
However, despite the popularity of art as an investment class, there are some who pour scorn on the idea. Researchers at Stanford University did some number crunching and discovered that the annual return on investment from fine art funds were less than advertised. The biggest problem with investing in fine art is that it’s difficult to sell quickly and auction houses extract heavy fees. On the other hand, it looks better than a gold bar.
If you decide to invest in a painting, buy it because it speaks to you. Art is a personal thing. Look for up and coming artists whose work you really like. They might crash and burn, but even if they do, at least you’ll own an artwork you enjoy having on your wall.