ASK HEIDI: Is art a wise investment?
HLK: Speculative art buying is not for everyone. Although it is widely accepted as a viable way to diversify assets it is still a high risk game. You need privileged access to fine art, good timing and connoisseurship.
So, if you are an insider or have a trusted source that gives you great access to art then art may be good a way to diversify an asset portfolio. The stock market and art market are not correlated, meaning they do not move in the same direction, so there are definitely opportunities to make money on art investments. For example, Postwar and Contemporary art took a sharp drop in 1990 while the S&P 5000 crashed in 1999. Since correlation is important for diversifying one’s portfolio, if you have a lot of money tied up in the stock market you will want to try to minimize your potential loss by also investing in something that doesn’t follow the same pattern and won’t crash if the stock market does. Furthermore, there is more reliable data than ever before to make more informed choices about art and monitor your investments objectively. This makes art very appealing but it must also be said that preservation and conservation plays an important role in maintaining the value of your art.
Many top collectors and dealers have been able to cash out on their art through good timing and exclusive access to quality fine art. Some savvy professionals even consider their art as their pension plan. Regardless of the success stories, I never recommend buying art solely for investment. Your art can just as easily become a financial burden so if you do decide to pursue art as investment proceed with extreme caution and talk with an art consultant that you trust.
Q. How does one follow an artist’s market?
A. There are several ways to follow or monitor an artist’s market. It used to be you literally followed them to their art openings, read critical reviews and saw their work in public collections and if privy, in people’s homes. You needed to know which artists were represented by reputable galleries. Aside from having a good nose for the trends and following all the shows, and reading the main art publications, there are several other news sources to learn about an artist’s activity and market data services. Research companies like Skate’s (industry sector research reports), Artnet (auction records), Artprice (auction prices and induces), and ArtFacts.net (real time artist’s ranking) all give you to access quantifiable, professional data and analysis on hundreds of artists.