Recently, I have been contacted by a friend who asked me what I thought about a painting that he bought from a not so famous artist.
He told me that he was confident that in a decade it would have been worth at least double his investment. Given my accounting background and the ability to quickly crunch numbers, I told him that any investment that renders a 7 per cent annually, doubles the principal capital over a decade, which is considered a decent amount for an average investor.
I also told him that if he put the same amount on Bitcoin in June he would have doubled the money by now.
It always boils down to risk versus profit.
That got me thinking about art as an investment overall and I decided to write this column.
First of all, the due disclaimer, I am not a financial adviser nor an expert in art investment, but I have put together a quick checklist that anyone could use should they consider investing in art.
Let us call it “Art investment for beginners”. Here is what I would do if I decided to invest in art: I would bring my knowledge of art up to date.
Too much dust has settled on my art textbooks from school. So I would probably visit the biggest bookshop in town and stock up the best books that I can find about new emerging artists.
I definitely cannot afford to step into art investments with a Picasso as my first purchase, so I would explore the scene from the root, looking at trends over the past decade.
Secondly, I would visit as many art galleries as I could, to check the price range of the painting and pieces on display. I would also check the crowd visiting the galleries, to see who is just window-shopping and who is actually purchasing pieces of art.
By observing their habits I would want to determine a pattern in purchasing habits of art collectors.
Then I would go back home to visit good old Google to find out what are the actual global trends, as opposed to the local scene. I would want to know the success stories of artists that have emerged from nothing into world recognised talents.
My best guess would be that in general a piece of art appreciates in value once the author passes away, so I might avoid purchasing pieces produced by young artists, unless they are rising stars and their creations are already featured in international media.
Lastly, I would want to set a budget and a target for my investment. If the entry point is too low, then it might not be worth the investment, but on the other hand, investing too much on a single piece of art or an individual artist might not be very wise.
The target profit on any investment should be higher than 5 per cent a year in my mind, however in art, given the nature of its high risk, I would expect at least double.
In the end an investment in art might become the best investment in one’s lifetime, but more often than not, a painting of a relatively unknown artist is more likely to remain at the same price point or even lose value over time.
Caution is recommended.
[Stefano Virgilli is a member of the International Press Association]
STEFANO VIRGILLI
stefano@virgilli.com
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