Art is emotional and for many, not associated with financial benefit. With works of art, one is attracted to art; the style, genre, colors, story, and sometimes even the artist who created it. However, if you could obtain something that could give you pleasure and reap financial reward, wouldn’t you consider it? Although art collecting is often associated with wealthy individuals who are looking only to fill their homes and businesses with beauty, there is a financial side of building an assortment of artworks. Let’s consider some of the advantages of collecting art.
The Numbers Don’t Lie—Or Do They?
First, let’s be clear that you can find data and opinions to back up anything you intrinsically believe in. Therefore, you will find sentiments on either side of the coin either in support of, or contrary to, art collecting for financial gain. However, it is important to note that according to Artnet Analytics Reports for 2017, the 15-year CAGR (compound annual growth rate) for fine arts ranged from 1.54% for Global Impressionist Art to 14.10% for 20th Century & Contemporary Chinese Art. When combined with the emotional benefits of art, that is not a bad return! The index of fine art sales has reported that, over the past four decades, the average rate of return has been near 10%, with some evidence in 2013 showing it is closer to 6.5%. With low interest rates and an increase in overall wealth, the art market remains a noticeable part of the international economy.
Reasons to Consider Art as an Investment
- Investing in New Talent—like venture-capital investing, there is a risk; however, if you happen to get in on the “ground floor” of an artist’s career, you can reap the rewards later when his or her works increase in demand. Additionally, over time the art will likely increase in value with a complete history; knowing details about the artist and the story behind the artwork, having thorough ownership records, provenance, and maintaining its condition will all aid in the work’s increase in value.
- Corporate Investing/Decorating with Art—there are benefits to morale and company culture can equate to increased sales and reduced turnover for employees. Additionally, it is a way to network with other authorities who may recognize the artist/works. In some industries, finding a connection with a potential client can mean a new business relationship!
- Estate planning—enjoy your investments with plans to sell later for profit. The buy and hold strategy can work here, although careful planning is crucial to prevent overwhelming estate taxes or disposition of the collection in a “fire sale” manner.
- Value of the collection as an entity. Like any other collectible, when one owns the entire selection, it immediately increases in value. Scarcity is one of the most unique aspects of an art collection (or art in general) which make it more valuable and attractive as an investment.
- Artificial Intelligence in play–Arthena, a company which uses quantitative research to help art collectors build a profitable portfolio and make art more accessible. Entering the age of big data, companies like Arthena are beginning to collect information and utilize it to navigate this veiled industry to discover good purchases and help investors diversify their funds. This may be geared more for those whose focus is strictly investment, as there is no personal access to specific works. Sybaris Collection offers the Art Tendency Report, in which member’s works are monitored over time, providing collectors with periodic updates on valuation of their pieces.
The Balance of Love & Money
As you can see, there are some financial benefits to collecting art, even when one considers some of the risks. As with any investments, one must weigh the individual pros and cons before diving into this exciting industry, either as an investment or simply enjoyment. At the end of the day, it truly is the emotional connection the investor has with the works he or she has purchased which are the benefit. And no, it is nearly impossible to measure those feelings. The art collector must decide for themselves where the balance lies.