Fine art’s market value

Why are original artworks so interesting for investors? Beside increasing in value, art can be used as collateral. What are the requirements and considerations? What are the characteristics of fine art that makes it a viable alternative security?

Oil WarLet’s analyze the appreciation of art in the course of time, because collecting and owning it can be compared to the stock market. When we examine the value of art in the context of current national and international economy, we draw lessons from the power of art in former economies and project what this may mean for the future. As a reader of Forbes you know what “market values” are. When wars or revolutions disrupt production in the oil fields, the market value of existing oil inventories rises. If solar power becomes affordable and available for the public, the market value of those polluters goes down.

AntiquesAll that is fast, but unstable money. In contrast, the art market is like a cozy antique shop, exudes solidity and tranquility. Valuable original art objects are no “liquid” investment. You can not buy a Kandinsky in seconds and sell, as you are used to with your shares. It is not cheap to invest in great works of art as it is a buy all-or-nothing decision. But if you’re not in the risky investment market of “on vogue” artist, it is certainly a good investment, in the longer term.

That is why it is important to find the right objects. Search in the right places. Check out the gallery websites from your desktop instead from rushing from gallery to gallery and one exhibition after another to be talked into something. Surf on the websites of the top fairs such as Art Basel and Art Basel Miami Beach and many others. With a clear mind you want to be asking questions like:

1. Who is (or was) the artist?
2. What is the significance of his art?
3. What is the origin of the artwork, the history and documentation
(Or more simply, where has the object been and who has it owned)?
4. Is it tagged with a fair price ticket?

Art CatalogTo learn all this, there is printed information in a variety of forms, but also  artist sites, gallery sites, online artist database resources, gallery exhibition catalogs, exhibition reviews and art reference books, websites and databases, including  art or artists encyclopedias, monographs on artists and art surveys or stories. In the great majority of cases this information is published by whoever sells the art. Of course, this information needs to be treated with caution, because each trader praises his goods.

Caution is also needed when you hear pompous drivel about “the majestic strokes or control the color of the artist”, which may all sound nice, but this flowery, inflated language is pretty meaningless if it does not contain factual information. Be aware of the fact that there is never a lack of foam in the art business. Facts are, for example, that the more important collections carry the original works of the artist, the more important he tends to be. If an official museum possesses his works, it is always a good sign. Private collections only have importance in the purchase decision when the collectors are known and respected in the arts community.

Once you have set your mind on an artist, find out in which of his artistic phases he created the work. All artists go through periods or phases in which their art is more or less inspired and competent, which means attractive to collectors and important in terms of its overall performance. Experienced collectors prefer the best work of the best period.

As you can see, there are several factors that are critical to make your investment a success. Maybe you consider all this effort tedious for just one object, but once you got ‘the hang of it’, and understand how everything works you will discover that it’s fun and that this ‘detective work’ is absolutely worthwhile. Experienced collectors as you can become one day explore and evaluate artworks in less than a few minutes. For you to have this knowledge not only will increase your enjoyment of art, but also your understanding of the art world in general.