Last week’s auction of Edvard Munch’s The Scream for a record-breaking $120 million made international news — and made many money-savvy individuals who have never thought about fine art wonder if this is an investment opportunity that they’re missing out on. Between this story, and the wonderful surprises sometimes seen on shows like Antiques Roadshow, it may seem as though investing in fine art might be a good way to surround yourself with beauty and make some cool cash.
Unfortunately, it’s not nearly that simple. Here is what you need to know about the sometimes confusing world of fine art:
1. Buy only art that you love. If you are only purchasing fine art because you believe it will increase in value, you’ve missed the point. This is like installing beige carpeting in your home because it will help the resale value. The important thing is whether or not you will enjoy your purchase while you have it. And while a starving artist probably would love to see your money no matter what, ultimately he’d prefer to see you buy his piece because you love the work, and not because you see the piece as a commodity. So if money is the only reason you are getting into fine art, then you might be better off playing the stock market because there’s less chance of a complete financial loss.
2. The art market is unbelievably volatile. This is why even the stock market tend to be easier to predict. What’s hot one day in the art market may be yesterday’s news the next. One only has to look at the list of artists who died in poverty and obscurity only to have their pieces go on to break sales records to know that the art world does not always know what it likes. Some artists who died without knowing what a huge impact they would have include Vincent Van Gogh, Paul Gauguin, Johannes Vermeer, and El Greco. If the art world couldn’t be counted on to recognize the genius of these visionaries in their lifetimes, you can’t expect the industry to always value what you think your art should be worth.
3. As with any luxury item, you will buy retail and sell wholesale. We know that driving a brand new car off the lot immediately lowers its value. Unfortunately, there is a similar situation with fine art. Your purchase of art will be at the retail price. But if you decide to sell, you will be receiving a wholesale prices.
If you have a piece that has really risen in value since your purchase, you can still potentially make money on your fine art — unlike with most cars. However, that means a lot of things need to happen — that you held onto the piece for several years and that people have decided that the artist is worth more money. In most cases, you can’t necessarily count on recouping the same amount that you originally spent. So again — only buy a piece if you really want to display it in your home.
4. Buying a piece of fine art is more like a relationship than a purchase. Many people decorated their first apartments with posters they purchased at bookstores and department stores. And, sometimes, those posters were thrown out after a move. There is absolutely nothing wrong with this, but it does not prepare you for the relationship you will have with fine art.
Buying a good piece of artwork that you truly love means that you are committed to finding a place for that piece. It may hang in your bedroom in one apartment, in your living room in another, and in the dining room of your first house. It becomes a part of who you are and how you think of your space. With that kind of relationship, it can become very difficult to part with your fine art. Owning fine art is often about much more than money.
The Bottom Line
Very few people can claim to have gotten rich by “investing” in artwork. For the average art lover, save your money for pieces that you simply can’t live without. You’ll be investing in the beauty of your home.