Navigating the World of Contemporary Art Investment
A few centuries ago, art was exclusively an object to be admired and inspired by people. Sometimes, authors have to overcome the difficulties of releasing a painting, a composition, or a sculpture. However, today, people increasingly look at contemporary art as an investment object.
Obviously, investing in contemporary art is quite different from investing in traditional currencies, precious metals, or other assets. Why is it so? Their value is almost independent of the dynamics of currency exchange rates or the global economic situation in general. Contemporary art investments in the right hands are a powerful tool that can make the holder rich in the future. We are here to give you a detailed guide about art investments, features, benefits, and nuances.
Obviously, investing in contemporary art is quite different from investing in traditional currencies, precious metals, or other assets. Why is it so? Their value is almost independent of the dynamics of currency exchange rates or the global economic situation in general. Contemporary art investments in the right hands are a powerful tool that can make the holder rich in the future. We are here to give you a detailed guide about art investments, features, benefits, and nuances.
art investment
Daryna Markova
contributor DOM Art Residence
Dec 9, 2024
Why Invest in Contemporary Art?
“Modern paintings are like women, you'll never enjoy them if you try to understand them,” the legendary rock singer Freddie Mercury once said about contemporary art. There is truth in his words, as some of today's works carry a deep social meaning that can be shocking.
Actually, art investment can have a number of benefits, including financial and cultural aspects. We have compiled some of the top reasons why you should invest in contemporary art in 2024.
Actually, art investment can have a number of benefits, including financial and cultural aspects. We have compiled some of the top reasons why you should invest in contemporary art in 2024.
Financial Returns
Experienced investors are well aware of the main rule of this activity - you must buy an asset before it starts to grow actively. That's why today, many people all over the world buy out the works of contemporary artists for a symbolic price.
Investing in contemporary art can grow in value dozens of times and bring you a fortune. Do you want to see real examples of such growth of artworks? An Invader has grown in value by more than 350% over a 5 year period of time. Statistics show that art objects grow by about 15% in value every year, while other traditional assets do not show stability.
Investing in contemporary art can grow in value dozens of times and bring you a fortune. Do you want to see real examples of such growth of artworks? An Invader has grown in value by more than 350% over a 5 year period of time. Statistics show that art objects grow by about 15% in value every year, while other traditional assets do not show stability.
Diversification Benefits
Investments are what allow many people to earn passively in 2024. You must adhere to diversification in order to succeed in this field of endeavor. Simply speaking, the more various investments you have in your portfolio, the more chances you have to increase your passive income rates.
Apart from different currencies and metals, people often choose different works of contemporary artists. As we mentioned above, art objects show a steady increase in value every year. That is why it is a great way to diversify your investment portfolio.
Apart from different currencies and metals, people often choose different works of contemporary artists. As we mentioned above, art objects show a steady increase in value every year. That is why it is a great way to diversify your investment portfolio.
Cultural and Social Value
Putting money down on contemporary art is not simply about financial issues. Why is it so? Because it contributes so much to saving cultural heritage. These artworks will give artists the means to keep doing what they do, which means either investigating or figuring out issues within society. Ultimately, it is also about patronage that supports the art community, providing that diverse stories are heard and taken seriously.
Further, art today questions social order and engages, often through speaking out, as part of a social movement. Investment in these cultural dialogues supports artists and indirectly supports these cultural dialogues, thereby creating a society that is more inclusive and reflective.
Further, art today questions social order and engages, often through speaking out, as part of a social movement. Investment in these cultural dialogues supports artists and indirectly supports these cultural dialogues, thereby creating a society that is more inclusive and reflective.
Risks and Challenges
It is no secret that any investment involves risks. Do not believe those who say that investing in contemporary art or other assets guarantees 100 percent success and an increase in the value of the object. Unfortunately, art investors can also face certain risks and complications in this field of endeavor. Here are the most common ones:
These are the most important reasons why you should approach the purchase of modern art objects wisely and responsibly. You should realize from the outset that there may be financial risks involved.
- The market can be volatile. Sometimes the prices of paintings, sculptures and printed works can change too quickly in response to a number of factors.
- Difficult to sell. If you want to sell an art object quickly and get cash, it will be difficult to do so because of the low liquidity percentage of such assets.
- Non-objective valuations. Art valuation is also inherently subjective and driven by many non-transparent factors that can produce broad discrepancies in price assessments.
- Art fakes. There are often fraudsters in the market who pass off fakes as original goods.
These are the most important reasons why you should approach the purchase of modern art objects wisely and responsibly. You should realize from the outset that there may be financial risks involved.
How to Start Investing in Contemporary Art?
Surely, the most important reason why art investments are so popular today is the opportunity to make passive income. However, you should not buy every piece of art you see at an exhibition or gallery. Investing in modern art is a complex process that requires the right approach. We have gathered some useful tips for you that will help you avoid losses and increase your chances of success in the future.
Research and Education
Contemporary art is a field that encompasses many directions, genres, types, and styles. Which objects would you most like to invest in? To begin with, go through art history and the current modern movements and learn the names of the various genres and painters who appeal to you and your investment goals.
Go to galleries, museums, and art fairs to watch the trends and the trajectory of the artists. You can read art market reports and art news to help you understand the economic aspect of the art world. It will just make you a better judge of aesthetics and will give you the freedom to make informed decisions in alignment with your investment strategy.
Go to galleries, museums, and art fairs to watch the trends and the trajectory of the artists. You can read art market reports and art news to help you understand the economic aspect of the art world. It will just make you a better judge of aesthetics and will give you the freedom to make informed decisions in alignment with your investment strategy.
Networking and Relationships
The next thing you should know is building relationships with people in the contemporary art community is important in a successful investment pathway. Look out for gallery owners, curators, and experienced collectors in your local scene and make a friend. Being the first to introduce someone from a small gallery to a larger one can be helpful for them and you and gain you some insider knowledge and access.
Networking can also help you find some new artists who may become famous in due time. Relationships within the parameters of the art world can facilitate alternative forms of advice, guide investments, and seduce you from the intricacies of the art market.
Networking can also help you find some new artists who may become famous in due time. Relationships within the parameters of the art world can facilitate alternative forms of advice, guide investments, and seduce you from the intricacies of the art market.
Budget and Financial Planning
Contemporary art investment requires effective financial planning. You may ask where you should start. Firstly, set a clear budget out of which you have budgeted both for the purchase of art and for the continuing costs associated with owning art. This expense column is worth including insurance and secure storage.
You could diversify your investments, even if they are small pieces that cost less than others, to help protect against risk. Don’t take it lightly, art should be part of a wider investment portfolio. As contemporary art can be worth holding in your portfolio for a very long time, be prepared for this.
You could diversify your investments, even if they are small pieces that cost less than others, to help protect against risk. Don’t take it lightly, art should be part of a wider investment portfolio. As contemporary art can be worth holding in your portfolio for a very long time, be prepared for this.
Legal and Tax Considerations
People who are well-versed in investing know how important it is to have legal backing. Art objects are no exception because you must formalize the purchase of ownership rights. Unfortunately, scammers can defraud those who take a lighthearted approach to buying today's art objects by forgetting about jurisdiction.
Ask a legal advisor if you want to know the path of ownership rights and provenance verification. It would help if you also considered the effect of capital gains tax and the tax advantages you may get when donating art to museums or taking it as loan collateral.
Ask a legal advisor if you want to know the path of ownership rights and provenance verification. It would help if you also considered the effect of capital gains tax and the tax advantages you may get when donating art to museums or taking it as loan collateral.
Conclusion
Now you know that contemporary art is more than just paintings or sculptures that you can look at in exhibitions. Using the right approach and knowledge, every investor can earn big profits on such objects. However, predicting the future and price dynamics of the art market is quite a difficult task.
Different factors, including the development of technology, can influence the rise or fall in the value of the works of contemporary artists. Today, digital NTFs are replacing ordinary paintings that we are used to seeing in galleries. Such cryptocurrency assets are also showing a rise in prices and are therefore being considered by investors.
Despite this, experts believe that quality works of contemporary art will continue to grow in value tomorrow, in a year, and even in 10 years. The more interest there is in a particular artwork, the higher it is valued by experts.
Different factors, including the development of technology, can influence the rise or fall in the value of the works of contemporary artists. Today, digital NTFs are replacing ordinary paintings that we are used to seeing in galleries. Such cryptocurrency assets are also showing a rise in prices and are therefore being considered by investors.
Despite this, experts believe that quality works of contemporary art will continue to grow in value tomorrow, in a year, and even in 10 years. The more interest there is in a particular artwork, the higher it is valued by experts.
FAQ
Is investing in contemporary art a good idea?
Collecting contemporary art is a good thing for a long-term investor who understands the market. Because contemporary art has the potential to offer attractive returns.
What type of art is the best investment?
The artwork depicting current socio-political or a topical issue is usually highly sought after. The most common types of art for people today are paintings and sculptures created by popular artists.
How much is contemporary art worth?
Modern art is very volatile in terms of value, and mostly depends on the particular artist and the work of art as well as the general market situation. Where some pieces might go for millions in an auction some others might have a much smaller market value.
How risky is investing in art?
Purchasing artwork is somewhat risky for investors. Unlike traditional securities, where value is relatively easy to determine, the market for contemporary art is relatively liberal. Yet, risks of contemporary art investment can be minimized by investing in already verified artists.
Collecting contemporary art is a good thing for a long-term investor who understands the market. Because contemporary art has the potential to offer attractive returns.
What type of art is the best investment?
The artwork depicting current socio-political or a topical issue is usually highly sought after. The most common types of art for people today are paintings and sculptures created by popular artists.
How much is contemporary art worth?
Modern art is very volatile in terms of value, and mostly depends on the particular artist and the work of art as well as the general market situation. Where some pieces might go for millions in an auction some others might have a much smaller market value.
How risky is investing in art?
Purchasing artwork is somewhat risky for investors. Unlike traditional securities, where value is relatively easy to determine, the market for contemporary art is relatively liberal. Yet, risks of contemporary art investment can be minimized by investing in already verified artists.