Art Investing - Making money buying artwork : eBay Guides

Art Investing

Of course the basic idea of ALL investing is to buy low and sell high.  To buy things before they have hit the highest popularity and then sell before it declines.  Art is a unique investment opportunity because there is rarely a decline.  The exceptions are of course fakes that are sold as originals and then later found out to be fakes and art that was purchased at the high of a trend and then the trend passes (as the Japanese did with impressionist painters in the 1980’s).  For whatever reason an artist or a painting becomes popular that moment in time can not be taken away.  For example if an artist becomes famous because he/she painted political figures in 1880 then those paintings will always hold their value for their place in history.   The moment in history can not be taken away.  Likewise, the first paper cuttings by Henry Matisse will always be the first to gain notoriety for that method, it can never be taken away.  This is very different from investing in stocks since being the first business to do something does not guarantee stock appreciation since another company can come along and slightly improve on the product, have better marketing, or better management or distribution of the product. 

The past decade the contemporary art market performed at 29% while the S&P 500 performed at 11% .  We can compare art investing with business investing but the statistics we need for a full comparison is not there since no one calculates a business “lifetime” but an artists life time is commonly used as a time marker.  In the United States of America, 1 out of 100 businesses survive after 25 years.  World Wide, 1 out of 200 artists’ work is worth anything after a lifetime.  But of those that make it, the artwork sometimes has dramatic profitability, for example: Richard Prince 43% yearly, Picasso 63.03% yearly (boy with a pipe), and these are just the sale prices.  André Level’s collection of  over a hundred paintings and drawings after only 10 years sold for 400 times the original cost giving an annual rate of return of 40%.  This doesn’t include the money made off of lending the art work out for a fee.

What makes art valuable?
1.  trends.  Unfortunately few people are very good at predicting this.  The basic idea is to buy it before everybody else wants it.
2.  scarcity.  Original art by nature is scarce.  Also as time goes by the number of original artwork pieces that survive without damage gets smaller and smaller.
3.  artist factors:  personality, historical significance, originality, notoriety, artist’s background.
4.  artwork factors:  historical significance, style of art, subject of art, new techniques, new methods.
5.  paper trail:  the stronger the art work can be authenticated as original the better able you are to demand a high value.

What nearly never goes up in value?
1.  unknown artists
2.  copycat artists
3.  art and/or artists that are already at the top of their value.
4.  art that can not be authenticated.
5.  mass produced art

How does art “make money”?
1.  Simple appreciation of the art.  Someone willing to pay more for it than you paid for it.
2.  Many high end lenders offer low interest loans using the art as collateral (art must be appraised and have insurance against damage, forgery, theft)
3.  Lending the art to museums for a fee either as a collection or individually. (collections tend to go for a larger fee) 
4.  Even if the artists you collect never become famous sometimes you or your heirs can still lend the art as a collection of (yourself), provided you have an interesting enough life and/or taste in art that other people would want to view your collection.

This article is NOT intended to be financial and/or investing advise. You are advised to consult professionals for advise.