The Art of Investing in Art
– by Anne Somers, www.huffingtonpost.co.uk/anne-somers/
In a seemingly endless era of record low interest rates, investors are constantly seeking alternative ways to make their money work for them.
Increasingly, financial institutions and their clients are turning to alternative assets such as fine art and antiques, which have the potential for an excellent return in the medium to long term investment category.
Some of the major international banks have gone as far as setting up expert panels to advise their alternative investment arms, and they take the investments possibilities so seriously that they are involved in the international collectables market these days. So why not take a look at areas such as contemporary and modern art, ceramics, glass, or even the more traditional collecting fields of coins or arms and armor. These offer much more than just the prospect of financial rewards. They offer the opportunity to own and enjoy original works created using the highest standards of craftsmanship. When it comes to art and antiques there are really two overlapping markets operating: the investment market and the collectors’ market.
Traditional areas such as silver, ceramics, glass and furniture are largely seen as the more stable collectors’ markets. Prices will not necessarily soar, but neither do they tend to crash. This means that they can be a solid but possibly unspectacular area for investment. Contemporary art and jewellery are more often seen as investment markets. The rewards here can be greater – sometimes far greater – but they can be more volatile disciplines price wise, so the risks are also enhanced.
Whatever you decide to go for, there are certain steps you can take to ensure that you maximize your potential while minimizing your risk on the investment side.
Here are my top tips:
1. Buy what you like. Whatever you buy, you will probably have to live with, maybe for some time. So consider the space where you will keep it. Additionally, how and where items are kept is paramount to the value of your investment. Any decline in condition will likely result in a decline in value.
2. What to buy? Price and collectability tend to be determined by rarity, condition, provenance (the history of the object and its ownership), the maker, and changing tastes. The relative importance of each of these will vary with each piece you buy.
3. Do your homework. Once you’ve identified what you want to buy, how do you find out more about it? Collecting clubs can give you information online, not just about the objects, but through blogs and forums, you can swap notes and ideas that bring you the latest updates on your chosen collecting field. Most areas of collecting also have key books and guides to help, too. Online price guides and specialist market reports can also be useful. Talk to dealers at fairs, too.
4. Where should you start looking to buy? Car boot sales, auctions, galleries, fairs, online? Each has its advantages, costs and risks. The more you know, the less the risk and the greater potential for profit. For example, dealers need to build in a margin of income to add to anything they sell, so you may pay above the current market value for an item. But the detailed receipt you get with your purchase will give you a better guarantee of authenticity and comeback, should you need it, when you come to sell. Remember the right investment choice will eventually mean a profit for you.
5. Buying at auction. Look at the auctioneer’s terms and conditions. These usually appear on their website or at the back of the catalog. As well as the hammer price, you will have to pay a buyer’s premium, a fee charged to all buyers by the auctioneer that helps pay for the service they provide. This can be as much as 25% of the hammer price, so it is advisable to factor it in before you start bidding. If you are buying something large, think about how are you going to bring it home? If you leave it at the auctioneers for more than a few days, there will be storage costs to pay.
6. The auction view. Unless the sale is uncatalogued, lots being offered will usually be put on view in the days leading up to the sale. You can visit the auction house in question or view them online and check the catalog description, condition reports, and estimate (the price range the auctioneer expects the lot to sell at). Auction sales are not subject to retail laws and bidders are expected to have satisfied themselves before the sale that they are happy with the objects they are bidding on. Make sure that you do.
7. Learn about bidding online. Whether it’s live online auctions or timed bidding sales over a set period, buying via the web can save you a lot of time, shoe leather and petrol. Auction alert systems mean you can receive emails about relevant lots coming up anywhere without having to travel through every state in the land.
Whatever you decide to do, make sure that you enjoy it. Investing, or simply buying at auction because you like something, should be a pleasure.