Fine Art As A Long Term Investment

Today's art market, with Alex Adelman

This article aims to educate you about the current state of the fine art market. We will use works from the collection of Alex Adelman at Masterworks Fine Art Gallery and investment insight from the foremost fine art investors in the industry.

Every day on the news we’re hearing doom and gloom about the national economy. Stocks are tanking, foreclosures are up and the costs of household necessities are rising steadily. In this uncertain time, many people are asking me if artwork is a good choice for a recession-proof investment. More and more people are going through a money makeover trying to diversify their investments by adding works of fine art to their finance portfolios.



Art isn’t just an investment. It is a tangible asset that can be enjoyed daily while it appreciates in value – what other investment affords that opportunity? Art can also be purchased to signify an important event in your life and we often encourage clients to celebrate a birth with a beautiful piece of artwork – after the child grows up and moves out, the artwork becomes theirs to enjoy and a nice nest egg to fall back on or a piece to be passed down generations.




Art As A Recession-Proof Investment

For a long time, real estate was thought to be a sound investment, but the current real estate market has proven that’s not the case anymore. Artwork is a different instance entirely, as are other tangible items like precious metals. Fine art has long been known as being recession-proof because it is independent of any other country’s currency or stock market.

As our current economy continues its downward spiral, I’m finding more and more people willing to put their money into art as an investment. They’re quickly realizing that it’s less risky than playing the current market.

Appreciation And How Art Is Appraised

A key point to remember is that older artwork rarely, if ever, declines in value. When was the last time you heard of a work of art from the 1500s decreasing in value? In fact, Old Master Prints are universally considered one of the most undervalued segments of the art market. The age of the artwork alone makes it valuable because there are very a limited number of pieces in existence, since most works have decayed or have been destroyed over time. Also, of course there is not no chance of additional works produced after the artist has deceased.

It’s important to do a little research with a professional art dealer to find out if you’re choosing a good piece for your investment. Many times, my clients tell me what artists or styles best suits their interest while I help them tailor their investment to their own unique taste in art. In contrast with non-tangible stocks, your stockbroker will never ask you what your favorite companies are and then invest in them based on your likes alone.

There are certain art pieces that have been proven to increase in value at a steady rate over time. For example, $1,000 invested in an Andy Warhol piece in 2005 is worth $3,250 today.1

A Joan Miró print, an Andy Warhol screenprint, or a Pablo Picasso etching will bring the greatest appreciation. These items, for example, are in limited supply due to the methods used to create them. Special printing plates used during production were almost always destroyed after use. Moreover, the prints or lithographs that have been signed by the artists are usually worth more than unsigned pieces. The most valuable prints are limited, featuring an edition number like 28/150 (meaning the print is the 28th out of an edition of 150).



How To Begin A Fine Art Collection

Art galleries have been long known as the place to go to start building a collection of fine art. They are filled with beautiful artwork, ideal places for convenient viewing. There is, however, one fundamental problem when purchasing art from a gallery: they typically have a very high overhead cost – building maintenance, utilities, employee salaries, high insurance premiums – meaning the retail price of the art has already been inflated. It’s difficult to begin an art investment portfolio if you’ve initially overpaid.

Collecting fine art can be done with as little as a $1000 start up. There are less expensive options, but they are usually mixed with posters and other mass-produced pieces. Another good way to get started in collecting fine art is to find a local artist who has been receiving some favorable reviews or other press in larger cities.

Why Use a Private Art Dealer

Some of the world’s largest wealth management companies are starting to realize the importance of art as an investment. However, brokers who specialize in fine art investments are trained in finances and not in art. They are great resources to help determine how much of your portfolio should include art, but not when choosing the individual art pieces. Find a private art dealer who is very knowledgeable about their art. A good private art dealer is one who will explain to you everything they know about the artwork and provide you with all the references available about the piece.

Low Prices

The key to investing in fine art is to utilize the help of a private art dealer who is knowledgeable and up front about the current forecast of the fine art market. Private art dealers are able to pass deals on to their clients that are not offered at retail galleries, because they do not have the expensive overhead of commercial rent or commissioned salesman. The math is simple! By finding a private art dealer, your investment has already appreciated more than someone who purchased a similar piece at a retail art gallery. A typical retail fine art gallery in San Francisco can easily have a $500,000 overhead per month; a private art dealer operates at about 10% of that cost.

Authenticity

The authenticity of a work of art greatly influences its value. Find a private art dealer who has done all the research and can provide you with documentation and references from well-known sources. This will give you peace of mind that the art community has agreed that your purchase is indeed authentic and collectible.

Framing

Find a private art dealer who will know the correct style of frame to match the period and style of artwork and is willing to do custom framing. They will also know the value of the piece and will care for it appropriately while it’s being framed. Can you imagine taking a piece of art worth tens of thousands of dollars to your local craft store and having it damaged while being framed?

Money Back Guarantee

It is highly unadvisable to deal with a private art dealer who does not offer a full, 100% money back guarantee on your purchase. NEVER buy artwork from a private art dealer who does not come with return privileges.

Invest with Confidence

When you make wise decisions in choosing a professional private art dealer, you will be confident that you have made a stable improvement to your investment portfolio.

1) "Artprice Market Information: Price Index." Artprice. 26 Aug. 2008.

Dr Iain Robertson discusses how art is a passion investment and reflects the collector and the world around them. He credits the Museum of Modern Art as defining modern art in the mainstream. And, although quite opinionated, this interview takes a strong stance on sales as giving life to contemporary art.

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Comments 4 comments

Fiona 7 years ago

My Picasso lithographs are a lot prettier than my mutual funds, and doing a lot better financially too!!


Ed Weber 6 years ago

As an art consultant for one of the finest fine art galleries in Florida, I must say I agree with almost everything in Mr. Adelman's article with the exception of the high cost of buying art from a gallery. While some add 100%-200% to prices, in some cases just to mark them down, others like the gallery I have worked for over 4 years now, price our art to sell. We also do our due diligence in researching art before acquiring it for our clients to assure them it is authentic, complete with provenance and Certificates of Authenticity. I always suggest my clients buy what they love while I guide them towards art that will increase in value, especially, as Mr. Adelman states, in the case of Masters' works because they aren't creating any new work.


Fine Art Gallery 5 years ago

I have never really though about fine art as an investment. Fiona I may just have have to take after you. Maybe then I can be less stressed about finances in the future.


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MasterworksFA 22 months ago from Oakland, CA

This article still holds true today with painting prices breaking records. A Rothko painting just shattered all contemporary art records selling for nearly 87 million at Christies New York just last week...!

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