Buying art: is it a profitable investment?

Stocks, bonds and mutual funds are not the only options for portfolio diversification. While these investments can offer variety, it's important to look beyond these asset classes for potentially lucrative alternatives. Investing in art, for example, is currently gaining in popularity.

Investing in art: the financial aspects

In addition to your personal preferences, investing in art also requires you to think about the financial aspects. There are several things to consider, starting with how much you can reasonably afford to invest.

In the high-end art market, individual pieces can easily sell at auction for millions of dollars. If this is not realistic for your investment budget, you may need to consider less expensive alternatives, such as buying art from local galleries or studios, or purchasing work at craft fairs. These opportunities offer access to emerging as well as established artists at prices that may be more appropriate for a   beginning art investor's budget.

Buying a work of art: consider the resale value

If you choose an art object as an investment, it is essential to consider the resale value – I s there really a value? Experience shows that of all the art objects sold, only about 10% will retain their value after the sale.

But few art buyers can afford to spend large sums of money without thinking. When a work of art retains its value, it is already a good investment. Capital gains would be realized over several years, not in the short term.

However, measuring the performance of art can be very tricky. Thus, there are many different factors to consider: the artist, the period, the medium, the individual work, and the evolution of prices over a period of several years.

Research the right type of art object

Investing in art is not something you should do on a whim. Take the time to learn about the market and what you can expect from investing in art. Remember, if you are investing in individual works of art, look beyond the purchase price. Additional costs you may need to consider include framing fees, sales tax, auction fees and storage fees. It is also wise to invest in a professional appraisal before buying, and of course, for high value artworks, you will need adequate insurance to protect your investment.

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