There are a lot of people that buy art pieces as investments. This might be in the form of paintings, but could also be sculpture or other art forms. You might see this happening and think that it could be a good idea for you to try out the same thing for yourself. While this could be good and be lucrative for you, it is worth having a better understanding of how it works, before you start, as this may not always be the case.
What is an Investment?
There are many people that do not really have a clear idea of what an investment actually is. Often there is some confusion between savings and investments as well, so it is worth clearing that up. With savings, you will put your money into a bank account and you will usually get paid some interest on that money. This means that you will get a little payment from the bank or building society for keeping your money there. You will be able to get your money back, in full when you need it. With an investment you will buy something with your money. It might be that you buy a share of a company, a house or a piece of art. So, you actually have a physical item and whether you make money from it will depend on two things. You may be able to generate an income from it, perhaps in the form of dividends or rental income in the case of shares or a house but you may not always be able to do that. The second way is when you sell the item, you will be able to normally get some money back. However, there is never a guarantee that you will be able to sell the item and the price is unknown. With some items, it is likely that the price will rise in time, especially if you hold on to it for a significant period of time, such as a decade or more. However, some investments are riskier than others as it can be difficult to tell whether the type of investment and the specific item you are buying, will increase in value or not.
How to Choose Art
Art varies a lot. You can buy art from young and new artists which could be cheaper or more well-known artists which will be dearer. There will be a huge choice of different styles, mediums and sizes of art. You will have a budget and that can be a good place to start. With all investments there is a risk that will lose all of the money that you invest. Therefore, make sure that when you are deciding on your budget you make sure that you pick an amount of money that you can afford to do without. This means that you do not spend more than you think you will need during the time that you plan on holding the investment. It can be best to assume it will make you nothing and so spend money that you can afford to lose.
Once you have a budget you can pick your art and you can go to galleries, directly approach artists or buy online. There will be a massive choice and it can be a good idea to think hard about what you buy. It is often advised that you buy art that you like and that you can hang on your wall and enjoy. This is because you will then gain something from the artwork in enjoyment. This means that if the value goes down or it even will not be able to sell at all, you will still have got value out of it for you.
Risks of Art Investment
The risks of investing in art can be similar to those of investing in anything. You could find that the fashion changes and so a painting that you buy, which was in a popular style, could go out of fashion after a while and if the demand for it falls, the price will also fall. It can be impossible to predict what might become more popular and what might go out of fashion and so this means that you will be taking a risk. Whether you are buying art by someone who is popular at the moment, someone that is young and may become popular or someone who was popular that you hope may become popular again, it can be extremely difficult to predict what might happen.
If you know something about the art market, perhaps you work in that area or have just followed it, then this could give you some advantage. Having knowledge and doing research will often be helpful. However, it is still really difficult to buy exactly the right piece at the right time. If you are only buying one piece, you are taking a bigger risk as well. It might be better to buy several pieces and spread the risk and then if one does not increase in value, the others may do. There are still no guarantees but you are less likely to lose so much money this way as the chances are that you will have picked one of the pieces well.
It is always wise to spend time thinking about what you want to invest in and having a good look at the market. If you have no knowledge of art then try to talk to some people that do. Follow the market, look at recent auctions and what has sold well and things like this. Also think about your future and whether you really can afford to invest the money. Consider whether you might need it in the future or whether you will be able to manage without having that money.