Investing in Art (Part 1 of 3)
Why Invest in Art? In the United States alone, fine art is a ten billion dollar-per-year market. Although many potential investors believe artwork to be an unprofitable addition to their portfolios, its return on investment actually nears that of the stock market.
Over the past fifty years, the average ROI for stocks has been roughly 10.9 percent, while the ROI for art investment has been 10.5.
Combine that kind of return with the long-term value retention of great art, and you have a potentially solid investment strategy.
Buying artwork can also provide a satisfaction that stocks or bonds never can. Those who truly appreciate great artwork will enjoy building a beautiful and diverse collection from which they can make a profit. When you think in terms of the overall value of your investments, and how they enrich your life as a whole, artwork may appeal to you even more than stocks, bonds, precious metals, and other common investment options.
Your Earning Potential
So, exactly how much can you expect to profit from any given piece of artwork? The art industry is remarkably unaffected by fluctuations in other markets, so the answer depends on factors such as artistic trends, the age and popularity of the piece in question, and whether or not the artist is still alive. However, given the trends over the last half-century, you can often make a decent prediction based on the initial price of a piece. Here are three examples for different starting budgets.
$25,000 – 50,000
At this price range, you could afford to buy originals of some of Andy Warhol’s lesser-known paintings and drawings. You might hear about smart investors who bought his work in the 1970s for mere hundreds and later sold them for millions, but those days are long-gone. Given the average ROI for art investments, you can expect to turn a $25,000 dollar painting around for about $27,000 to $28,000. That’s not an immense return, but given that Warhol is dead and always popular, your investment would very likely be a safe one.
$50,000 – 75,000
If you’re willing and able to spend more than $50,000, you might buy some of Paul Maxwell’s better-known and oft-acclaimed pieces, such as “Bands Grids Striations Pixels & Other Markings.” This work is a fine example of the stencil and grid techniques Maxwell has developed, and it is a good bet it will fetch an even better price after he dies. You can expect that after several years, a Maxwell that originally cost $60,000 might sell for $70,000 or more.
$75,000 – $100,000
Several of contemporary artist William Quigley’s portraits are currently selling for close to $100,000.
However, similar works of his sell for much lower prices, and he is likely to be producing for decades to come. This is an example of why artwork in this price range can be a bit riskier than cheaper pieces. A turnaround at the average ROI of %10.5 would mean making $10,500 from an investment of $100,000, but the piece’s value could wildly fluctuate over the next thirty to forty years. This price range is best for those who are looking at very long-term investments, and who will gain extra value by simply enjoying the pieces they buy.
This article is for information purposes only.
This article is in no way a recommendation to buy or sell certain securities or investment products. You should always consult a financial advisor before investing.
Before starting an investment program I recommend you seek independent professional legal, tax and investment advice as to whether it is suitable for your particular needs and circumstances. Failure to seek detailed professional personally tailored advice prior to acting could lead to you acting contrary to your own best interests and could lead to losses of capital.
I expressly deny any liability to you for loss in any manner or form now or at any time in the future. You should be aware that some investments will lose money.