In the past, when I’ve written about buying art, I’ve said, purchase what you like and don’t think about your purchase as an investment. In fact, most of us aren’t investors. We’re looking to cover the walls of our homes and offices with pleasant images. I have, however, ventured to give advice about collecting (Blogs 1/6/2017 & 2/20/17) and exposed a few scams along the way. (Blog 1/4/16) But, as the art market has tripled in value since 2003, my former reservation has been turned on its head.
Today, many people are, indeed, buying art as an investment. Collecting has one advantage. It can increase in value without raising your taxes, at least until you sell it. It can serve as collateral. One Picasso might get you a loan sizable enough to purchase a home in Palm Beach, Florida. Pay the interest on the loan and watch your Picasso continue to rise in value.
Nonetheless, collecting art has its perils. A work could lose value. It could be stolen. Or, you might pay too much for it in the first place. And don’t forget insurance. High end art can require hefty premiums.
To avoid some of the perils, an investor can join an art fund. In an art fund, people band together to buy art collectively. Pooling resources means individuals can speculate on the high-end of the market which is less volatile. The trick is to know when to buy and when to sell and at what price. Whatever you do, says writer Katya Kazakina, you can’t afford to fall in love with your purchase if you’re an art speculator. If you are one, forget everything I’ve previously written about collecting. (Managing the Boss’s Art Collection by Katya Kazakina, Bloomberg Businessweek, May-May 7, 2017, pgs. 38-39.)