• Srini

Is art a good investment?

Updated: Jan 5, 2021

This is a question nearly everyone asks when they are just starting out with buying art.

Wrong question.

Buying art as investment isn't for you if you're asking the question. The reason is that art is a complex investment, and not usually suited to the average portfolio. And yet there are some very good reasons to buy art as an investment too. We look into this in more detail here.

First off, here are the Cons.

Art is an illiquid investment. Anyone who is in the art business can tell you that it is difficult to sell art. If you are building a collection to sell onward later for profit, make sure your art is part of a balanced portfolio across many asset classes like cash, deposits, stocks, funds, gold, property, and so on. When you need cash in an emergency, it isn't going to come from a distress sale of art.

Art is easily forged. Andy Warhol prints and pieces of the Berlin Wall are available everywhere, and will always be. Unless you know what you're doing, you might be buying a very expensive piece of worthless paper or cloth. Alongside checking for provenance, keep all the paperwork that comes with your piece.

Art is hard to store. Art can get damaged if exposed to extremes of temperature or humidity, or from insect or light damage. Collectors can also be fussy, and devalue art that has been on display. Serious collectors pay specialists to store their art for them under controlled conditions to keep the art as fresh as the day it was purchased. Insurance is essential, and you will need a specialist insurer.

Art is hard to value. Some truly unique pieces are really difficult to value, and best done by a professional valuer. On the other hand, editioned multiples can be valued through comparables listed online for sale.

Mind and A Room, from an edition of 25 by Mark Powell

And now for the Pros.

Art is primarily for enjoyment. If you are buying art that you love, and intend to enjoy by having it on display around your house or workplace, then that is an objective in itself. This objective is, obviously, the most fun, as it lets you enjoy your art every day. If you are buying expensive art, though, then pay proper attention to how you display it. It is worth investing in good framing so that it is protected. This includes UV proof glass so that there is no damage to the pigments in the paint over time from light exposure. Needless to say, protect your art from direct sunlight. Also, display it in a place that keeps it out of the way of accidental damage from pets, children and clumsy adults.

Art is easy to gift. Tax laws around gifting can be complex, especially as it applies to art. However, a well planned gift can become valuable over time.

Art as inheritance. Art is a beautiful legacy to leave to our survivors. Inheritance tax laws that apply to art vary from country to country. In general, art is becoming an asset class that represents the identity of the family or collector.


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