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7 Great Tips for Investing in Art

You have probably heard a lot about diversifying your investment portfolio. Having a diverse group of assets in your portfolio is as important as starting to invest in the first place.

So you might want to add some new and different investment assets to your portfolio. For example, if you already have real estate, stocks, bonds, cryptocurrency, and REITs, consider investing in art.

Not many folks know that art is a significant investment, especially for those who have time to research new artists. Keep reading for tips on buying art, so you do not waste your hard-earned cash.

Look at Art As a Long-Term Investment

When you buy a new crypto coin that is getting hyped by the market, you are probably only purchasing it for a few weeks or months before you sell it to get your profits.

But art does not work that way. When you purchase art, you are doing it, knowing that you will be holding it for a long time.

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An average hold period of 10 years or more is a minimum when purchasing art. That is quite a long time. Many folks buy art and then bequeath it to their heirs since a good piece of art from a well-known artist will only keep increasing in value over time.

Understand That Art Is Illiquid 

If you are retiring soon or know that you have a significant expense, you do not want to invest your cash into art. Art is not the most liquid asset out there; it will take months to sell the piece of art, even longer if it is not from a well-known artist.

Keep this illiquidity in mind when purchasing art, so you do not get caught unawares. You do not want to lose a bunch of money because you had to unload the piece of art to some random buyer for a fraction of its cost.

Art Does Not Have to Be Exorbitantly Priced to Be Valuable

You do not need to spend hundreds of thousands of dollars to buy art, especially if you consider it an investment. Hundreds of new artists and sculptors are not that well-known, but their art could be worth a lot in the future.

If you love art and have an eye for this kind of thing, then buy art or sculptures that speak to your soul rather than always going for a well-known artist.

There are many ways to invest in art nowadays. For example, you can use online art marketplaces like Masterworks (learn what Veblen goods are on here) or Saatchi Art and buy a fraction of a painting, sharing the cost with several other art investors. This way, you can still invest in expensive pieces but not spend exorbitant sums on them.

Or you can use the Sotheby’s art auction to procure a piece there.

Art Should Only Be a Small Portion of Your Portfolio

Like everything else you invest in, you must ensure that your art investments do not take up a significant percentage of your overall portfolio. They should be at max 10-20% of the portfolio.

That way, if you make a mistake in choosing the artwork, it will not be too much of a hit on your portfolio. This should keep you safe, no matter what types of art you end up investing in.

Art Needs Maintenance After Purchase

Remember that your job is not done once you purchase the artwork. You must pay close attention to the humidity and temperature in your home or where you store your famous painting so it does not deteriorate due to unsuitable conditions.

If you are not displaying it in your home but storing it, you will have to pay for that. Also, do not forget about buying insurance on your artwork and getting an authenticity certificate. All these costs increase over time, so keep that in mind before buying art.

Art Does Not Follow the Stock Markets Ups and Downs

The thing to remember about art is that its value does not rise or decline with the stock market. That is why investing in art is a good idea for anyone looking to protect or diversify their investment portfolio.

Even if the stock market seems to be crashing or doing poorly, you can rely upon a famous artwork to keep rising in value over time. Even if it takes years or decades for that to happen, you know it is following a unique route unrelated to the general financial market.

Art Is a Risky Investment Option

The above does not mean that investing in art does not come with its own set of risks. For example, since every artwork is unique, you do not know if the piece you chose to invest in will increase in value. Also, the art market goes up and down following a unique cycle.

That is why doing your research before plunging into the deep end of the art investment scene is essential. Do not blindly listen to art gurus, friends, or other art investors and collectors. Instead, follow your gut (buy what you like to look at) and research each piece before purchasing it.

Investing in Art Is a New Way to Diversify Portfolios

If you have never considered investing in art, the time is now! Hundreds of artworks, both by famous artists and by no-name ones, are awaiting your perusal and investment.

Keep reading through related articles on our website to build your financial knowledge base.

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