Given the current climate of economic uncertainty, many have been reluctant to invest in traditional asset classes such as property. This has resulted in more people looking to diversify their portfolios to mitigate these precarious times.
The art market is not correlated with stocks or bonds and tends to remain stable regardless of how the financial markets are performing. Art is a value-preserving asset class, making it a powerful form of alternative investment, consistently delivering average returns of 7.6%. Research from Deloitte backs this up, with 85% of wealth managers recommending the inclusion of fine art in a balanced investment portfolio.
Despite this, many potential investors still find the art world somewhat intimidating, and are not sure where to begin when it comes to making their first investment in fine art. If you have an interest in utilising this alternative asset to diversify your portfolio, here are five key pointers to help you get started.
1. Immerse yourself in the market
If you want to make the most of a potential art investment, it is important to take stock of emerging trends. These tend to be consumer-driven, with collectors, galleries and auction houses all shaping what will become the next big thing, so immersing yourself in the art world is invaluable for spotting developing trends and determining where interest in the market currently lies.
Attending museums, galleries and art fairs will assist you in making connections within the community, as well as becoming educated about the kind of art you want to invest in, as will other resources such as specialist books and magazines. The digital transformation of the art world, which has been accelerated by the events of the pandemic, also provides many opportunities to learn about and view art you may be otherwise unable to access, with online communities making it easier to connect with others in the art sphere.
2. Set a budget
It is not necessary to have millions at your disposal to begin investing in original art, but it is highly advisable to set a realistic budget and decide on a maximum amount you are willing to spend.
In the heat of an auction environment, it might be all too tempting to overspend, so setting and sticking to this budget is vital for making the most out of a potential investment. This will allow you to laser-focus on works that are within your determined price-range, enabling you to conduct more relevant research so you can invest with confidence.
3. Diversify into different mediums
When considering fine art, many people automatically think of paintings, but there are a range of different mediums that offer good investment potential. The price of artworks traditionally varies on the materials and mediums they use, and this can be used to your advantage to buy an original piece at an affordable price point.
Collectibles such as limited-edition prints are, for example, a great way to begin your collection, and represent a way for younger collectors and those on a more modest budget to get a foothold in the investment scene without breaking the bank. Art editions such as etchings and lithographs offer an affordable way to access highly promising artists without the prohibitive price tag of an original work, and as the reputation of the artist grows, so will the value of the print.
These mediums are also cheaper from a maintenance perspective, making them a more comfortable investment for those just starting out, as they do not come with the sometimes-hefty costs of restoration and maintenance that could result in a depreciation in value of an original work.
4. Quality over quantity
It is highly advisable to make the quality of the work one of your top priorities when picking a potential investment piece. The condition of an artwork, even those by big names, will inevitably be a significant factor when determining value, and will command a lower price if damaged than in mint condition.
When selecting a piece for investment, consider the materials used, as those that utilise high-quality materials are far more likely to maintain their condition. Likewise, you should always take into account how well the piece will age, and bear in mind any potential maintenance costs that will affect the profit to be made from the piece. It is often beneficial to consult with an art specialist on these matters, as they will be best placed to advise you before you invest.
5. Maintain your investment
As with any valuable asset, art must be properly maintained. Being a long-term investment means it is crucial to preserve the value of the works you invest in and avoid any hazards that might compromise the longevity and ultimately the value of a given piece.
Be aware of the specific upkeep needs of the different mediums in your collection to keep them in good condition and prevent any damage as a result of improper care. Different mediums will of course have different needs from a maintenance perspective, and while a wooden sculpture may only require minimal care, an oil painting will have more specialist upkeep needs.
When it comes to preserving the integrity of the pieces in your collection it is also of great importance to ensure they are stored or displayed in a suitable environment. Avoid extreme or frequent changes in temperature, direct sunlight and moisture. Getting this wrong could easily result in damage to the piece and costly repairs that affect returns further down the line.
While investing in art is certainly not as intimidating as it might first sound, there are certain key elements you should be aware of in order to maximise any potential returns. If you want to begin investing in original art but still feel unsure of how to get started, you should consider booking a consultation with a specialist who will be best placed to advise you, so you can invest with confidence.
Steven Sulley is art advisor and founder of Soho-based art studio, Woodbury House