Diversifying your investments is a great way to anticipate possible loss of money. In addition, the various markets in which you can invest money are mostly unstable. You might as well not take a lot of risk and invest in various types of investments. Thus, more and more investors are now starting to invest in art. It is a more or less stable market which can provide considerable gains over the long term. And you don't have to be an enthusiast to get started in this practice. You just need to learn about the actual reasons for investing in art.
When planning to buy an artwork, you must of course make sure that it is authentic and certified. Once acquired, it will make it possible to benefit from an advantageous tax system. Indeed, it is not taxable. Also, the allowance in the event of inheritance is significant and can be used to pay tax (ISF or taxes related to inheritance taxes). This type of investment is therefore advantageous from a tax standpoint, but it is also easy to transmit. It is not likely to lose value over time.
Investing in art has nothing to do with other types of investments that are volatile or liquid. Like stone, this type of investment should be preferred because it is long term. But the difference is, you always have it at home, and you keep the artwork for a while. While for real estate investment, its development generally depends on the urbanization of the selected sector. It can therefore just as well go down or up.
Also, investing in art is not like investing in gold. Following the same principle as cash, gold is currently becoming an electronic investment. Therefore, you no longer own it physically, you only get a title for the equivalent amount. Which is not always pleasant, in case of a severe crisis.
For fun and for decoration
While investing in art may for some be a simple investment like so many others, some people do it for fun. A desire to own an object endowed with meaning and which contains a message from its author, without forgetting his or her intention. So, buying an artwork means being in agreement with the artist's intentions. We can say that we first focus on the author and then project onto the art object itself. Then, what differentiates this type of placement is also its decorative character. You can only be proud to have certain artworks on your walls. Moreover, it improves the image you have with your guests, if it is in your accommodation.
The acquisition of an artwork also corresponds to the personality of each and everyone. It's another way of expressing yourself and sharing your style and tastes. In the workplace, the impact is also significant in the eyes of your clients. You just need to choose the location of the artworks, for example in the office reserved for welcoming clients.
In recent years, the trend of investing in art objects has gained popularity and this is because we are talking about rare products, that cannot be reproduced on a large scale.
Precisely because there is a limited number of products, there are also a lot of collectors who would pay large sums to enjoy owning a painting or a sculpture.
Those who view art as an investment enjoy stability, products that survive the economic downturn, limited supply and rising demand.
The value of an artwork increases over time, but it is important to conduct research and invest in art as valuable, rare or original goods. This market may include works by ancient masters as well as objects signed by contemporary artists.
Paintings, sculptures, objects of decorative art, worship, archaeology or from different periods are becoming more interesting for all those who want to invest in goods with the possibility of hoarding.
Revenues can be obtained from the sale of artworks, but also by renting them to art galleries or exhibitions.
After the resounding success of Salvator Mundi's work ($ 400,000,000 award at Christie's New York), the art world is regaining the frantic attention of investors. Beyond speculation about the authenticity of the work, the identity of the buyer and the like, one thing remains certain: the new record is 100,000,000 higher than the previous one, Paul Gauguin's work sold privately in 2015.
How to buy and sell fine art and what are the opportunities and risks of an investment in art?
I will limit myself only to fine art (paintings and sculptures), although the market is more diversified, including decorative art, furniture, collectibles such as memorabilia, military, philately, cult objects, archaeological objects and so on.
In the last 10 years only, the art market has known a more important development. This development has made both the development and the need for market monitoring systems possible.
The public art market index and an average annual price for each artist included in the monitoring.
Internationally, there is the ArtPrice portal, which monitors public transactions with works of art and publishes certain annual returns. The average annual yield of the art market reached 24% in the "gloryous" period 2008-2011, amid a modest initial value. However, after 2012-2015 there was an aggressive correction of prices, in the market marking a return around the values of 2012 (the Consecrated Art index was at about 2000 points in 2012, today being at 2044 points). Inspired, investing in art can be more profitable than other investment alternatives.
What incites the art market the most is the combination of investment with passion. The possibility of earning is doubled by the joy of owning artworks and perhaps by satisfying a need for (self) recognition and prestige.
The contemporary art market seems to offer the most active form of investment in art, generating, in recent years, spectacular increases in auction prices.
The "old" art market is more stable, but already positioned far above contemporary art, in terms of prices. The price variation is smaller for "old" art and the volatility is much higher.
Opportunities and dangers
The pitfalls of the art market include, first of all, the problems of authenticity. The work of art is often an intangible, physically manifested through the painting itself. But the value is given by the significance of that work, by the importance of its author, by the historical importance of the period in which it was created, etc. It is similar, perhaps, to a brand. and then it is important to buy the authentic, correct physical manifestation and not a copy.
Value is another risk factor, mainly due to the impossibility of quantifying some elements of comparison between works, such as beauty, formal quality, importance in the context of the work, etc. Many times, artworks tend to be sold at a special value, different from the market value, established on the basis of subjective criteria (eg I like…, it reminds me of… etc).
Probably the biggest threat to investing in art is emotional involvement. Unlike other investment products, artworks are unique and acquire certain characteristics: belonging to an important collection is reflected in value, provenance, mention in catalogues or exhibition exposure are also recognized by the market. But the market also stigmatizes artworks that have not been sold for a long time, or that have been sold at a certain price in an auction. That is why it is very important that the acquisition of art for investment purposes is rigorously planned and implemented without emotional involvement.
In conclusion, if you decide to invest in art, you need to keep in mind that the art market is similar to other investment markets and tends to be organized by borrowing and applying similar methodologies and tools.
The returns on investment depend, as on any market, on the investor's skill to intuit the change, but also to understand the psychology behind the acquisition of artworks by collectors.
Volatility, even if it is among the lowest, is offset by the (almost) certainty that the value of a picture will exist for hundreds of years.
Where we can buy artworks
When you decide to invest in art, you need to know that the art market follows the trends of a primary market, generally formed by art galleries and artists promoting themselves independently - a market focused, naturally, on contemporary art, and a secondary market, consisting of auction houses and galleries that operate as intermediaries of "old" works of art, but also of contemporary works sold by collectors.
More recently however, there has been a tendency for auction houses to replace the primary market, as they benefit from much greater visibility and offer the prospect of far more significant gains.
There are also a number of intermediaries, the so-called "art dealers", who act independently and generally without forms of legal organization, working under the provisions of the Fiscal Code on (non) taxation of the sale of personal property.