Photography - modern & contemporary art - 19th century - Old masters

ART as an INVESTMENT

Art has been an attractive investment for centuries and is becoming increasingly recognized as it has outperformed more conservative investments over the last few decades. It is an alternative investment earning capital gains rather than a dividend.

Well established artists

Investment in the art market requires a knowledge of the markets for individual artists, but also of the associated investment risk. As with the stock markets, this is not insignificant. However, the art market is considerably less volatile. With uncertain stock market returns and interest rates at their lowest in decades, nervous investors are considering alternative investment avenues such as fine art, wine and even stamps.
The art market is far less sensitive to economic crises and geopolitical events than other assets. Art prices held up well in the wake of the 11 September terrorist attacks and the Iraq war. As with stock markets, the art market contracts in times of uncertainty. The annual volume of art works sold at auction dropped 36% between 2000 and 2003. While stock markets tend to price in the slightest concerns investors may have, there is no automatic correlated reaction on the art market. In effect, rather than compromise on price, buyers and sellers of works of art become far more selective. At auctions, this translates into a higher bought-in rate: between 2000 and 2003 the bought-in rate rose by 9%. The quality of the works bought and sold guarantees the return on investment, while the lower sales volume fuels prices.

Art can never be considered as financial asset. Critics contend that investing in art disregards the traditional financial analysis, since they do not generate income that can be discounted. It is a bet on the price appreciation of something whose value defies financial logic.

In the short-term, market volatility is relatively high compared with other asset classes. But over the long-term -- experience suggests 10 years and more -- investment in art provides important annual average returns. The prerequisite is investment in top-quality art.

Living artists

t might appear attractive to buy young unknown Artist before their paintings rocket in value – but the odds of success and often quality of the art make it a high risk strategy. Remember the best art by artists whether they are established or emerging is likely to appreciate more in value then inferior work by the same artist. So buy the best art you can afford – preferably by the best (proven and established) artists.