Many investors are broadening their investment schemes by becoming active in various luxury markets in this day and age. Some choose to invest in wine, coins, even cattle. But the art world offers plenty of investment opportunities even for laymen and beginners who want to buy valuable artworks. It is a common misconception that the art market is welcoming only for the affluent. Aside from personal appreciation and admiration fine art provokes in investors, there are many financial and practical benefits and drawbacks to investing in fine art. Here we will dissect what lies in store for you if you decide to become an art collector.

Should I invest in fine art?

Interestingly enough, many myths have put off ‘ordinary people’ from investing in art. The first concern is that you are at risk of becoming a victim of many scams, fakes, and rip-offs that lurk in the fine art market. 

Of course, this is not entirely unfounded. Yet, a crucial source of the rush and excitement of being an art investor lies in doing your research and trading with the right art galleries, brokers, curators, and artists. Furthermore, you can always protect your investment by insuring your fine art collection. 

So, let’s take a look at arguments for and against becoming an art collector in more detail.

Pros of Investing in Fine Art

Blue-chip artworks are rarely subject to inflation

If you have never heard this term, blue-chip art means that the piece is attributed to acclaimed or world-famous artists like El Greco, Picasso, Van Gogh, Modigliani, etc. As mentioned before, you have to do a fair amount of research if you plan to trade in blue-chip artworks. Furthermore, you have to ‘enter’ the fine art world confidently to be successful at it.

But all the efforts will be more than worth the hassle. Blue-chip artworks are an excellent hedge against inflation. This is one of the primary reasons why trading art is so popular among the wealthy. Think of it this way. Investing in artworks is like investing in real estate. Or in other words, a valuable artwork is a tangible asset that is rarely subject to fluctuations on the stock market. 

Supporting an emerging artist can be a good investment (if done right)

However, you may also support a promising artist and get the same financial reassurance. Just be mindful that the rise in appreciation and value of an art piece authored by an emerging artist may skyrocket for quite a while but also flatten out after some time. Hence, it takes a lot of knowledge, interest, and commitment to distinguish a great artist from an artist of the moment. Also, the value of artworks belonging to different schools or art movements will increase at different rates.

You do not have to be rich to invest in fine art

Another misgiving is that trading art only makes sense if you are extremely rich. Starting from 2011, art investors saw anywhere from 11% to 14% return on investment. Admittedly, such a staggering increase resulted from China’s attempt to purchase back its art heritage from the West. 

Nowadays, the potential return is not as high, but given that investing in fine art outperforms investing in equities, it is far from true that buying art makes sense only if you are wealthy. In fact, the value of fine art is highly stable. Even investing a few thousand dollars into a lesser-known but appreciated artist is highly likely to multiply once the artist attracts the art community’s attention. 

So, you could go rogue and give a chance to a promising artist or some interesting old artifact. Your initial investment of, for example, $2,000 can easily jump to $10,000 if the said artist or cultural artifacts become trendy in the art world. 

Furthermore, moving the artwork from the gallery to your home is not as expensive as it used to be. Note that moving a newly purchased piece of art is best handled by reliable fine art movers. Nowadays, you can work with experienced professionals and avoid losing your investments in case of transportation damages. 

The Cons of Investing in Fine Art

The return is high, but the risk is high as well

So, you can potentially earn a lot of money if you decide to join and trade in the high art society. However, unless you have stumbled upon a rare or blue-chip piece, you can never be too sure your investment will increase in value. 

Sure, it happens that art investors suddenly become millionaires. Unfortunately, ending up with an unsellable artwork is a more realistic outcome. For example, conceptual and pop art are usually flashy and attractive to laymen entering the art market. And yes, these kinds of artworks can accumulate a lot of prestige. But, more often than not, you are just taking a chance with these kinds of pieces. This is particularly true if the artist has not come into the limelight yet.

When art dealers evaluate art, they do this based on the history of transactions that the given artist has had so far. So, depending on what’s in vogue, the piece’s value could either skyrocket or – not. This basically means that the appreciation for artworks of artists just stepping into the market is arbitrary. 

You cannot sell your artworks whenever you want

One of the biggest disadvantages to developing a fine art collection is that selling it takes time. You cannot sell a painting in a day or two. The entire process can become quite long and require a lot of effort on your or your curator’s part. You have to contact auction houses, pay their commissions, pay additional fees when you sell the artwork, etc.

This means that you cannot just ‘flip’ fine art whenever you feel like it. Also, if you sell too soon, you may even regret being hasty and selling the piece for less money. You may have to be patient and wait for the right moment to do so. However, the problem is that you can never be too sure if the right moment has come. 

Storing fine art can be tricky

One of the major cons of investing in fine art is the lack of storage space or inappropriate storage conditions. If you live in a big city, your apartment can easily become overcrowded rather than embellished, thanks to your art collection. Furthermore, you need to make an effort and protect your art collection by keeping it in a suitable environment. Damp, hot air, or exposure to bright light can easily damage artwork. This means you may have to shell out even more money for your artworks’ proper storage and maintenance.

As children, many of us have found a hobby in collecting stamps, coins, or postcards. In contrast, some people take this hobby a step further and become art collectors. It may become an expensive hobby, but it can also be rewarding if done correctly from the beginning. Therefore, we have put together a beginner’s guide to buying valuable art to help you get started. 

Find your style before buying valuable art

Whenever you want to start collecting art, finding your style first is essential. You should only purchase pieces that represent you and that you can connect with. Thus, start doing some research into the types of art:

1. You can visit art galleries or studios and educate yourself. Don’t be afraid to ask questions. Curators love to engage in discussions about art, plus they are a great source of information.
2. Libraries are also a great source of inspiration, especially for people who enjoy reading about art history.
3. Research online, the Internet is the greatest source of information of our time. 

After you acquire a clear view of what type of art you enjoy the most, you can take the next step in the beginner’s guide to buying valuable art. 

Set a budget

Some of us tend to get carried away when buying things that we like. When it comes to art, things can get out of hand even more. To ensure you avoid unpleasant situations, set a budget for spending. This way, you will make sure you buy the art you like at a fair price. After all, you want to make a collection, not stop after your first piece of art because you can’t afford to buy more. 

Find the right places to buy art

This is one of the critical steps in ensuring you buy authentic art. Art fraud is flourishing, especially online. Research as much as you can about your art provider to avoid unpleasant situations. For example, you can ask for authenticity certificates. Also, you can request a contract that states that the piece is genuine and includes terms that protect you in the event of fraud. When searching for the best places to buy art, in addition to art galleries, you might want to look for art fairs, studios, and auctions. Most of the time, buying directly from the source is the wisest decision. It removes any doubt about authenticity and value.

Buying from art galleries

One of the safest places where you can buy valuable pieces of art is galleries. They keep records of all the art pieces ever exposed, and they can guarantee authenticity. Another big plus is that dealers in art galleries are usually open to negotiation. You can get up to 20 percent off of the initial price. At the same time, keep in mind that the artist you are buying from receives only half of the amount, with the rest going to the gallery. 

On the other hand, some art galleries might make it more difficult for first-time buyers to obtain art from them. For example, even if you can afford a particular piece, the dealer may refuse to sell it to you. This is because they sometimes seek customers with a so-called “pedigree” who purchase expensive pieces regularly. This can create some discomfort for a beginner but don’t take it personally, and always try again. 

You should also pay attention to whether or not the price is listed and whether or not the piece has a red dot. If it has a dot, it means that it has been sold.

Looking for art in studios 

Some artists invite potential customers into their studios to see how they create. It’s a fantastic way to meet the artist and discover how your favorite piece of art was made. Furthermore, you can buy directly from the source, which can mean better prices and the opportunity to negotiate.

Art fairs and auctions 

Art fairs are a fantastic way to see what’s new in town and what the prices are. Even if an art fair might be pricey at first, prices generally drop at the end of the event. Moreover, dealers are more approachable at fairs than in galleries. It is a less formal event, and they are more open to engaging in discussions. Don’t miss this opportunity to ask questions. 

On the other hand, auctions are a different story. For example, you never go to an auction unprepared. Always do thorough research and ask more experienced people for help. Even if it might be confusing in the beginning, auctions can be fun. There is a bit of show and entertainment to them that can get you hooked. Yet, you should only participate if you can stop yourself from going over your budget. Keep in mind that auctions can be fun but dangerous for your pocket.

Protect the art you buy

Another essential thing to mention in the beginner’s guide to buying valuable art is to protect the artwork you buy. Insuring your art is vital, especially if you are collecting as an investment. You never know how a painting might get damaged or stolen. Protect yourself and your art by insuring it. 

Prepare your home for art

If you are planning to hang wall art in your home, make sure you consider some details. For instance, try not to hang paintings over the fireplace. Heat is an essential factor in the deterioration and aging process of canvases. Also, avoid placing them on exterior walls or near windows. Humidity is also incredibly dangerous when it comes to paintings. Instead, choose to expose art on straight walls, at eye level, and with proper framing.

How to keep valuable art safe if you are relocating?

If you are moving to another home, ensure that your art is in good hands. Making sure it is properly packed and transported safely to the new location can be time-consuming and stressful. The easiest way to relieve yourself of this burden is to hire residential movers. Bring in professionals to help you transfer to your new beautiful home and enjoy a carefree move.

Final words

Entering the world of art collectors can be difficult but also satisfying. It requires a lot of research, tact, and sometimes good negotiation skills. Make sure you have a promising debut by following our beginner’s guide to buying valuable art.

People collect art for a number of reasons, from enjoying the artistry to purchasing pieces as future investments. Although, if you’re planning to start your own art business from your home or a gallery, business columnist Nicole Long strongly advises that before you kick off your business, you must first meet state regulations, get an insurance policy, and take necessary business and legal measures that protect both yourself and your art pieces.

Whichever type of art collector you are, your pieces are likely worth a significant amount. And this is precisely why you should get them insured. On top of that, high-value pieces are susceptible to theft since their location is general knowledge; as well as being at the mercy of aging and potential devaluation. A good insurance policy with comprehensive coverage is not recommended, it is necessary.

Safeguarding pieces from everyday threats

For causal art owners it’s easy to become complacent when your art piece is just sitting at home. However, while you may believe that theft is the biggest threat, artwork over the fireplace, over the tub, or by the window could be in a greater peril. Heat and humidity can quickly damage and devalue your art, so it’s important to monitor the air quality in your home. Art collection registrar Susan Sauls urges collectors to keep their art in areas with stable temperatures and good air circulation.

But even if you’re fastidious about monitoring the environment around the artwork, there’s still a laundry list of home accidents waiting to happen, such as a fire or an accidental wine splash. While you still need to take extra care, the right insurance policy will allow you to confidently display and enjoy your collection at home knowing that you have a strong contingency policy.

A Vital Part of an Art Business’ Structure

Artworks are generally priced based on the dealer’s prestige, the artists’ background, and several other nuanced trends—all volatile factors. As such, businesses belonging to the art sector are some of the most heavily insured in the world. Business owners are constantly looking for additional layers of protection, as any mishap or legal issue could end up costing them a lot of money personally.

This is why most galleries ensure that, alongside their insurance, they are also legally protected through their business structure, such as a corporation or LLC. Those who form a corporation in Pennsylvania will not only have the full protection of being a separate business entity, but will also have the funds, through the shareholders, to take out numerous insurance policies.

On the other hand smaller art businesses that form an LLC in New York, the art capital of America, will be able to set up knowing that their insurance and business will protect them. And with galleries in New York getting sued because of the recent pandemic, having this double protection is more vital than ever.

Protecting pieces that are always moving around

One way to increase the value of your pieces is through displaying them in different galleries, which is why you need to take the necessary precautions before handing your items over. The moment the pieces are in transit, they could be exposed to a number of dangers like improper storage or even theft by dishonest workers.

In a previous article for our surety bonding division BFBond.com, we talked about how U.S. businesses lose an average of $1.13 million due to employee theft. With a proper insurance policy—or, possibly, a fidelity bond— you will be protected from property damage, theft, and fraud. So draft up a thorough contract with the galleries you’ll be working with, and get your pieces insured.

Another important consideration to make is working with knowledgeable and experienced art insurance agents. As each piece of fine art is literally one of a kind, a comprehensive insurance policy is the best protection that you can get.

Written exclusively for ArtInsuranceNow.com

by Ana Cooler

Insurance Business Magazine, the leading business magazine for today’s sophisticated commercial Insurance Broker names William G. Fleischer and Bernard Fleischer & Sons, Inc. a top specialist broker for 2020. Read the article HERE 

Contact Bernard Fleischer & Sons, Inc. when you require a knowledgeable insurance broker that handles Fine Art, Surety Bonds and everything in between. Visit us for art insurance at ArtInsuranceNow.com and commercial Surety at BFBond.com or call 800-921-1008

https://www.redfin.com/blog/how-to-incorporate-art-into-your-home/

ArtInsuranceNow.com has contributed to Redfin Blog article on how to incorporate art thoughtfully into your home, check it out above!

The fire that has destroyed Notre Dame is not the first incident to affect a site of great cultural and historical value. Unfortunately, it will not be the last. Just last year, we saw a fire destroy up to 90% of the precious artifacts and other items housed in the National Museum of Brazil. Our cultural institutions are under threat from a variety of risks both natural and manmade. What can we do to better protect our cultural treasures?

Works of art in buildings such as the Notre Dame cathedral are generally not insured because they are often priceless. Any artworks on loan from third parties would, however, be insured. While some of the large paintings at Notre-Dame could not be taken down in time, the mayor of Paris, Anne Hidalgo, said at the scene of the fire that a number of the many artworks in the cathedral had been rescued and were being put in safe storage.

Heritage sites, cultural institutions, independent galleries, collectors, and artists are uniquely vulnerable and often underprepared. Many cultural institutions have few resources or time to invest in preparedness and emergency response programs. While no amount of money in insurance payouts will bring back a lost stained-glass window or other masterpieces, not having insurance or not enough insurance is an even greater threat to works of art. For this reason, We at ArtInsuranceNow.com / Bernard Fleischer & Sons Inc. are raising awareness to the owners of cultural items such as fine-art and collectibles on just how important having the proper coverage is.

A valuable tool to have is a knowledgeable fine-art and collectibles insurance broker to guide you in the process of managing your risk. Insuring art requires an experienced broker that knows how to navigate the often-confusing details of high-value insurance. At ArtInsuranceNow.com / Bernard Fleischer & Sons Inc. we know art, and what it takes to insure it properly so you don’t have to. We are your resource and can answer any questions you may have regarding the protection of art and items of cultural significance.

Visit us at ArtInsuranceNow.com to live chat with a professional or call us at 800-921-1008 to speak to a friendly voice that can guide you through the process of risk management.

Art fair season is upon us, bringing together an extraordinary concentration of artworks, private dealers and galleries. The question between collectors attending these fairs is “what did you buy?”.

Well, we have a more important question to those art buyers… how did you insure it? Having a knowledgeable fine-art and collectibles insurance broker to guide you in the process of managing your risk is an integral part of the art buying process. Insuring art requires an experienced broker that knows how to navigate the often-confusing details of art insurance.

From an insurance standpoint, fairs represent a high-risk time for galleries, dealers and, of course, clients. Traditionally, the gallery or dealer covers the delivery of the piece to the new owner. But it’s important to know what questions to ask so you understand the details and/or can negotiate conditions to reduce risk, for example:

• Who’s responsible for the piece at what stage of the transaction – is it yours once it is paid for, when the title is transferred, or when it’s in your possession?
• Who’s responsible for packing and shipping – the gallery or a third-party fine arts vendor? Make sure professional fine art packers & shippers are used!
• Is the appropriate packing or crating (in some cases, customized) being used for the type of piece? Think about size, fragility, composition, etc
• If you’re at an international event, or a fair with international galleries represented, will the piece need to go through US Customs and, if so, what precautions will be made and by who?

Once home, how do you protect your investments?

Being a newcomer to the art scene can be intimidating. Someone starting to collect may not necessarily purchase very expensive pieces initially, so they may not think their art is valuable enough to warrant an insurance policy. We provide new collectors with the same coverage, service, and claims handling as someone with a higher collection value. And they are also protected against exposures they are vulnerable to in their day to day lives.

There is no reason a collector of any size should feel their investment isn’t enough to be insured properly. When your collection grows, so will our partnership with you. The limits can be increased and we can continue to provide support and peace of mind over the years.

At ArtInsuranceNow.com / Bernard Fleischer & Sons Inc. we know art, and what it takes to insure it properly. We are your resource and can answer any questions you may have regarding the protection of artwork, tools, studio space, museums or galleries.