How to invest in art as a beginner?


As we approach 2024, an increasing number of individuals are recognizing the benefits of investing in art. Although art isn't easily converted to cash, it can prove to be a wise investment for those with the right approach. This article explores the reasons why art makes for a sound investment and offers essential advice for newcomers looking to venture into this realm. We'll also delve into considerations when purchasing art and strategies for obtaining the most favorable prices.

## **U.S. Fine art investments have grown nearly 75% in 6 years**

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## **How to invest in art?**

Art investing involves buying and selling artwork, and there are two main markets for this: primary and secondary. In the primary market, you buy directly from the artist or a gallery, usually the first time the art is sold. Once it's sold, it moves to the secondary market.\
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**Auction houses**\
The secondary market commonly includes auction houses where people sell art they own to make a profit. Well-known auction houses like Sotheby’s and Christie’s exist both in-person and online. Smaller ones, like Artfinder and Society6, provide access to less-known artwork. Buyers at auction houses often pay a buyer's premium, which can be as high as 30%, in addition to the sale price.

**Art galleries**\
Art galleries, on the other hand, showcase a variety of artwork, often in the primary market, displaying pieces not sold before. They offer a chance to see curated selections that the gallery thinks might be valuable.

**Art fairs**\
Art fairs are events where investors can buy directly from artists. While they might be an opportunity to discover new artists, it's not guaranteed. Local and regional art fairs can have beautiful pieces that may gain value over time.

**Art funds and fractional shares**\
For beginners with limited capital, investing in art through fractional shares is an easy way to start. Platforms like Masterworks buy artwork, and investors can purchase shares of that piece. When the artwork is sold, investors get a percentage of the proceeds. This is part of the secondary market, as the art has already been sold. Investing in fractional shares is accessible and affordable, with expert teams handling evaluations. The price is lower, and there's liquidity if the platform allows buying and selling shares on a secondary market.

## **When should you invest in art?**

Investing in art involves a strategic approach, with a general principle of buying when prices are low and selling when they are high. While this seems straightforward, it requires careful consideration. In the realm of contemporary art, artists in the early stages of their careers, often labeled as 'emerging artists,' tend to be more affordable but come with higher investment risk. Collectors who invest in emerging artists are essentially betting on their future success, hoping they will become widely recognized. An example of this strategy would be early investment in an artist like Basquiat, whose works from the 1970s in New York now yield significant returns in today's auction houses.

For those who find emerging artists too high-risk, 'established' or 'mid-career' artists present a viable alternative. While they come with a higher price tag, they are considered less risky investments. These artists have already made their mark in the art world, consistently selling at auction houses and providing reliable annual returns. Artists like Banksy and Damien Hirst fall into the category of established or mid-career artists.

At the pinnacle of the art market are 'Blue Chip' artists, representing the biggest names globally. These artists command the highest prices, necessitating a substantial initial investment. However, the value of Blue Chip artists is often considered almost assured, given their prominence in prestigious museums and extensive scholarly attention. Artists like Monet, Picasso, and Cezanne are classified as Blue Chip. Their sales prices are well-documented and established by indices such as Artprice100, which tracks the top 100 performing artists at auction over the last five years.

## **10 things that determine the true value of an art**

**1. Authenticity**\
It is the true and intended manifestation of an artist's idea. Anything that is worth something is worth being faked. So it is necessary for an art work to pass the authenticity check by a seasoned expert.

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**Jean-Michel Basquiat's untitled work (Skull)**\
Jean-Michel Basquiat's untitled work (Skull) is set a record at Sotheby’s, selling for $110.5 million. The staggering selling price spurred the owner of another Basquiat painting to have the work authenticated. An ultraviolet light examination revealed that the painting included elements drawn by Basquiat in invisible ink.

**2. Condition**\
A crack on the surface of a canvas could be a signature feature of the artist’s work or just a sign of damage. So, it becomes necessary to get an artwork assessed by an expert who can determine the work’s physical state and understand how the condition impacts the value of art.

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**Joan Mitchell's STRAW**\
Joan Mitchell's paintings from the 1950s should not have developed cracks over them. If a crack has developed to an extent where there is paint loss and this has been covered by a conservator, the valuation of the artwork drops substantially.

**3. Rarity**\
Supply and demand are the most basic factors that determine the value of any commodity. Now, consider something so rare that it is impossible to be recreated. It is this very desire to own something that is only one of its kind in the world that multiplies the value of art.

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**Kay Sage's I Saw Three Cities, 1944**\
One of the fundamentals of auction dynamics is the idea that you walk away when something outpaces the real market value. There's always a next one, another one, but in the case of Kay Sage's artworks there isn't another one - there are only about a few hundred works in the world by Kay.

**4. Provenance**\
It is the history of ownership of art. It is the story of ownership that is just as fascinating, if not more fascinating than the story of the artist. The feeling of wanting to own something that once belonged to a popular figure also determines the value of art.

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**The back of Conca’s painting features a handwritten inscription indicating that is was gift to D. Domenico Guastaferro**\
A painting by Sebastiano Conca (1680-1764), which contains an old hand-written note that describes its title and date, as well as providing provenance - that it was gifted to one D. Domenico Guastaferro in July 1748.

**5. Historical importance**\
It is derived from the moment the artwork is created. It is not about the events after the art was created but about the circumstances in which it was created. The belief that art holds clues to the moment it was created is what determines the value of art.

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**Imperial White Jade Seal used by Emperor Qianlong (1736-1796) of the Qing Dynasty**\
This seal fetched $18 million at the 2021 Sotheby's Hong Kong Spring Auction. On the side of the jade seal, there is a carving of the imperial prose named Jientang (the Hall of Jien), the order of Qianlong, in remembrance of where he met his grandfather(5).

**6. Size**\
It is not as straightforward as large-scale works that are more desirable. In certain categories, objects that fit in your palm are highly valued, like the Chinese works of art sale. But in a category like postwar painting - it is always the bigger the better. So, yes, size does matter in determining the value of art.

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**Sacha Jafri walking on top of his painting The Journey of Humanity**\
At 17,000 square feet, Sacha Jafri's The Journey of Humanity sold for $62 million at an auction held at Atlantis, The Palm hotel. The sale puts it among the most expensive artworks by a living artist ever sold at auction

**7. Fashion**\
It is very closely related to trend and trend reflects the mood of the world in the era it was born in. Many works soon fall out of favor, while only a handful of them take a generation to gain appreciation. The world bets on what's coming next and this too determines the value of art.

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**The Carters pose as part of Tiffany & Co's "About Love" campaign**\
Hip hop super couple Jay-Z and Beyoncé have posed alongside a rare painting by Jean-Michel Basquiat from 1982 called Equals Pi, which depicts a figure in a dunce cap alongside the phrase “Ten Yen” on a seafoam green background.

**8. Subject matter**\
It determines the artist's mindset when the art was being created. Historic data shows that fundamentally pleasing images like bright landscapes or nudes have been highly valued. In the case of contemporary art, the feeling of art collectors wanting to embrace its capacity to challenge is what adds to the value of art.

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**Pablo Picasso's LE RÊVE (Trans: The Dream)**\
Le Reve depicts Picasso's French mistress Marie-Thérèse Walter. Unlike his later mistress Dora Maar whom Picasso often portrayed as tortured or threatening, Marie-Therese usually appears as blonde, sunny and bright in his paintings. In March 2013, Le Reve was sold in a private sale for $155 million making it the fifth most expensive painting ever sold at the time.

**9. Medium**\
It is what the artist used to create the work. There are trends in the unwritten hierarchy of valuing art. In the case of sculptors, marble or bronze leads the line and in the case of paintings, it has always been oil-on-canvas. It is the people's recognition of an artist's area of excellence with the certain medium on which his work translates the best that determines the value of the art.

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**“L’Allée des Alyscamps,” by Vincent van Gogh, painted on Nov. 1, 1888, sold for $66.3 million.**

**10. Quality**\
It is a mixture of craftsmanship, intricate detailing, and technical innovation that makes an artwork special, unique, and more appealing. It is the perfect blend of these factors that determines the quality that lasts for generations and that, in turn, determines the value of the art.

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**Vincent van Gogh, Self-portrait without beard, this may have been Van Gogh's last self-portrait. Given as a birthday gift to his mother**

## **Historical returns**

Investing in art is considered an excellent hedge against market volatility due to its non-correlation with traditional markets. The fact that the value of art doesn't necessarily move in tandem with stock or bond markets makes it a valuable diversification tool.

By having full ownership of the artwork, your investment is tied to a tangible asset with inherent value. This can provide a sense of security, as the value of the art is not solely dependent on market fluctuations. In times of economic uncertainty or market downturns, art may retain or even increase in value, offering a potential safeguard for your funds.

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## **Pros and cons of investing in art**

### **Pros of investing in art:**

**Physical (or Digital) control:** Art is a tangible or digital asset that you can physically control. Whether it's a traditional painting or digital art, you have ownership and can interact with it directly.

**Aesthetic appreciation:** Beyond financial gains, investing in art offers the advantage of aesthetic enjoyment. Many investors take pleasure in owning something visually appealing, adding both beauty and potential financial value to their lives.

**Supporting artists:** Buying art from living artists allows you to contribute to and support their creative endeavors. This aspect can be emotionally rewarding for investors who appreciate the arts.

### **Cons of investing in art:**

**Physical care and storage costs:** Artwork, especially physical pieces, requires proper care to maintain its value. This may involve ongoing maintenance or the expense of secure storage, adding to the overall cost of ownership.

**Knowledge requirements:** Successful art investment demands a deep understanding of the art market, awareness of trends, and access to relevant resources. The learning curve can be steep, making it challenging for those without extensive knowledge.

**Uncertain popularity:** Predicting what art will become popular or maintain its value is inherently uncertain. Choosing the right artist or trend is a challenging task, and if your investment doesn't appreciate, you risk losing the initial capital.

## **Where to find investment grade art**

If you're in search of contemporary artworks, starting your exploration on platforms like Artnet or Artsy is advisable. For more historical pieces, turning to auction sites such as Bonhams or Christie's can provide insights into available artworks and historical sales. Auction houses often host themed auctions throughout the year, with schedules typically announced well in advance, and you can find information about these events on platforms like Sotheby's auction calendar.

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Navigating the art world during your personal research can be overwhelming due to the vast number of artists and the opacity of pricing. The challenge of making informed decisions is evident. Seeking guidance from an expert early on becomes crucial. An expert specializing in the type of art you're interested in can not only assist you in navigating this complexity but also provide access to pieces that may not be readily available on the open market.

## **Conclusion**

In conclusion, investing in art can be a rewarding venture when approached with careful consideration and a well-defined strategy. The art market offers diverse opportunities, ranging from emerging artists with the potential for significant returns to established and Blue Chip artists that provide more stability. Aligning your investment goals with your genuine interest in art, conducting thorough research, and seeking guidance from experts are key elements in making informed decisions. Additionally, understanding the dynamics of the art market, such as the importance of timing and the distinctions between different artist categories, enhances your ability to navigate this unique investment landscape. Art, when thoughtfully integrated into a diversified portfolio, not only has the potential for financial gains but also adds a layer of cultural and aesthetic value to one's investment journey.


This 2024 guide for art investment beginners explores primary and secondary markets, emphasizing strategic timing for investing in emerging, established, and Blue Chip artists. It highlights ten factors determining art value and notes historical returns as a hedge against market volatility. Pros of art investment include control and aesthetic appreciation, while cons involve care costs and uncertain popularity. Recommended platforms include Artnet, Artsy, and auction sites like Bonhams and Christie's, with expert guidance crucial for navigating the complex market.

How to invest in art as a beginner?

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