As one’s wealth grows, so too does his taste. There exists an inherent evolution of niceties when financial limitations do not dictate the class of comfort one surrounds oneself with. As youths growing up and in college, most people adorned the walls of their bedrooms and apartments with posters and family photos. There was the occasional soccer club flag or meticulously decorated corkboard that adorned the walls, and while these are perfectly adequate pieces for inspiration, they are far from acceptable for an established home.
If indeed you find yourself among the abundantly wealthy, then you may be in the market for fine art. However, as with any exorbitant purchase, it is important to identify the prospective value of artworks before purchasing it at auction.
90% of art loses its value as soon as it leaves the art galleries, which makes it very difficult to determine whether or not what you purchase will appreciate over time. The art economy is an entity outside of the regular economy. Because fine art is essentially an indicator of wealth, the community of buyers is populated with wealthy folk. Thusly, one should not invest in art if he believes that wealth will become more equitable over time. Only when the very wealthy become even more so will art appreciate – and again, only 10% of art will appreciate.
Change in Value
Investing in art is unlike doing so in stocks, bonds, or land. With standard investments, you can mathematically determine the risk and prospects of appreciation. The value of art, on the other hand, is subjective and what you receive upon a purchase is an opaque asset. The opinion of the art community determines the value of a piece and often, a piece will not sell for as much the second time as the first. A person may want a single piece to complete a collection or private sales from masters might happen under the radar. Any number of exchanges and circumstances can change the value of fine art.
If you are interested in speculating in the art community, but not necessarily in the market for buying pieces to house in your own home or gallery, you should look into investing in an art fund. Because there is a large array of art funds, you can take in select a fund that specializes in a style or period that particularly strikes your fancy. Make note that artwork is far from a liquid asset. Investments in art can take upwards of 8 years before any appreciation is noted.