How to Invest in Art: A Seven-Point Guide to Help You Understand the World of Contemporary Art Investment

1. Why Invest in Art?

Given the current unpredictable financial climate, many are wondering: is art a good investment? Not only has art become a top choice for investors looking to diversify their portfolios, it also offers a unique blend of financial and aesthetic rewards.

With low maintenance costs, unrivalled portability and minimal volatility, art makes a compelling argument to be in everyone’s portfolio. A refuge during periods of high inflation, art often remains stable or even appreciates in value during economic downturns.

By partnering with an art advisory service like Maddox Art Advisory, you will gain an edge when it comes to understanding the intricacies of the art world and learn how to invest in Contemporary art that has demonstrated consistent growth in value over time.

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2. Emerging, Established or Blue-Chip Artists?

When considering how to buy art as an investment, it is important to understand the three different categories of artist: emerging, established and Blue Chip. Knowing the difference between them will help guide your investment choices.

Emerging Artists

In the early stages of their professional careers, emerging artists are often in the phase of exploring their aesthetic language and discovering their signature style. During this formative period, they are focussed on finding their voice and building an audience that will support and follow them on their journey.

A Contemporary art investment focussed on emerging artists requires relatively low initial capital, making it the most accessible entry point for many. While investments in this category often come with an extended holding period - the amount of time you hold an artwork for - the potential for outstanding returns is considerable.

Investing in an emerging artist at the early stage in their career can also be a very rewarding experience. Acting as a patron, investors often build strong personal connections with the artist, helping to shape their career as they embark on a journey of growth and discovery together.

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Established Artists

With a strong reputation and profile within the art world, works by established artists are owned by committed collectors and shown at reputable galleries and institutions. Additionally, established artists have created a large inventory of works, enabling them to supply shows and meet the demands of their expanding collector base.

While investing in established artists still requires a relatively low initial capital, returns are more predictable than with emerging artists, with an extended holding period frequently leading to outstanding returns. Investors, acting as patrons, can also enjoy a deep connection with the artist, with an artist’s proven track record and growing recognition making this a secure investment choice while still retaining the personal touch.

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Blue Chip Artists

Blue chip art investment is the least volatile in the art market, offering reliable high returns with significantly lower risks compared to emerging and established artists.

Blue chip artists have a high profile not just within the art world but also in broader cultural spheres. Widely known for their signature styles, they have produced several influential bodies of work over the course of their careers. With constant curatorial interest from museums and top-tier galleries, many blue chip artists run large professional studios or are represented by an estate, reflecting their esteemed position in the art world. And with global demand from numerous buyers and sellers, the solid track record of consistent returns over time for blue chip artists further solidifies their investment appeal.

Blue chip art investments generally require a larger financial commitment. This higher investment threshold is primarily due to the established market value and reputation of these renowned artists. Their works are often considered safer investments in the art world due to their historical performance, consistent demand, and provenance. As a result, they command higher prices, reflecting not only their artistic merit but also their established prestige and market stability.

Sourcing works by blue chip artists is often more complex, with factors like provenance, authenticity and freshness to the market all coming into play. For guidance on how to invest in blue chip art, using an advisory service such as Maddox Art Advisory is invaluable. Not only will they help you avoid making costly mistakes, with their expert analysis and deep market insights, they will guide you to blue chip art investments that offer the best long-term capital preservation.

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3. How to Invest in Art

The art investment process is intricate and begins with understanding one’s investment goals and appetite for risk, followed by rigorous research, seeking expert advice and, finally, making an informed purchase. With any art investment, it’s essential to stay updated with market trends, ensuring you make decisions that align with your aesthetic preferences and financial aspirations. Anyone wondering how to invest in art should ask themselves the following questions, which will enable you to establish your investment goals.

What are your collecting aims? Consider if you want to invest in art purely to make a profit or whether you are hoping to enjoy the art you collect also. What kind of an investment budget do you have to play with? It’s important to have a clear idea of how much you are willing to spend. What is your risk appetite? This will act as a guide when it comes to the type of artist you invest in - emerging, established or blue chip. Finally, where do your personal tastes lie? If you haven’t already done so, this is your green light to research as many different artists as you can to find out which styles and oeuvres you are drawn to.

Once you have established all of the above, it’s time to consult an expert with the experience and knowledge to help you navigate the art world and find the best pieces to invest in. By partnering with a reputable art market advisory service like Maddox Art Advisory, you will benefit from expert advice on art market trends, emerging artists and proven investment-worthy artworks and learn how to buy Contemporary art that is most likely to increase in value.

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4. What Drives the Price Appreciation of Investment Art?

When you enter the world of art as an investor, you are embarking on an exciting journey of potential capital growth. To get the most out of your investment, it’s important to have a thorough understanding of the factors that drive the art market. These will not only guide your investment decisions but can act as powerful catalysts in increasing the value of an artwork.

Rarity and quality are key drivers in the appreciation of art. An artwork’s uniqueness, or if it is part of a limited series, can significantly enhance its value. Quality is also closely tied to the value of art. Not all artworks are created equal, with those that are viewed as masterpieces or showcase unparalleled skill and technique often commanding higher prices.

The curatorial acknowledgement of an artist or artwork - if they have been featured in major exhibitions at museums or galleries - can also lead to an uptick in popularity and, subsequently, value. Similarly, marketing and promotion can also be a major factor in the appreciation of art. The power of strategic marketing, whether through esteemed galleries, exhibitions or even social media, can attract potential buyers, driving up artwork prices.

The world of public sales and auction records can also give certain artworks a big boost and affect the overall valuation of an artist’s oeuvre. Art advisory services like Maddox Art Advisory keep a close eye on auction trends, analysing them in real time.

Finally, provenance plays a vital role in the valuation of art. Get to know the history of an artwork, including its past owners and exhibition record. Pieces with a rich provenance, like those previously owned by notable collectors or showcased in significant museums, can also garner higher prices.

5. Art Market Resilience

The art market has long defied the volatility of global economies, with its remarkable resilience rooted in its unique characteristics as an investment asset.

When traditional markets are in turmoil, the art market often thrives. History has borne witness to art’s steadfast nature during some of the most challenging moments, including the Great Depression in 1929, the Second World War, the ‘Dot-Com’ Bubble, the 2008 Recession and the recent Covid-19 pandemic. In each instance, art emerged as a reliable haven for astute investors looking to safeguard their wealth.

In the complex world of investment, achieving diversification is paramount. Especially in volatile economic climates, investors are looking for assets that can reduce their exposure to the risks inherent in certain assets and smooth out fluctuations in their portfolio as a whole. Art offers this diversification, making it an essential part of a balanced asset allocation strategy designed to maximise art investment returns while mitigating risks.

During moments of pronounced uncertainty, such as wars or periods of runaway inflation, blue chip art, in particular, is considered a stable, value-preserving real asset.

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6. How Investment Art has Outperformed Other Passion Investments

Compared to other passion investments like luxury cars or rare wines, art has consistently delivered superior returns. The tangibility of art, combined with its cultural significance and limited supply, often leads to more sustainable appreciation over time.

Passion investments encompass luxury items like jewellery, cars and art, with their value hinging on their rarity, quality and cultural significance. While they represent a fusion of an investor’s personal interests and hobbies, these items also serve as tangible stores of value that can be monetised.

Such luxury collectibles offer an enticing form of portfolio diversification. They don't just symbolise our hobbies and interests; they also represent solid stores of wealth. The joy of owning a cherished item intensifies when it not only reflects personal passions but also serves as a prudent investment. In the Knight Frank Wealth Report of 2023, it was revealed that some 59% of Ultra High Net Worth Individuals are gravitating towards art investments. This uptick is likely influenced by the impressive 29% growth in the value of the art market in 2022.

Art accounts for nearly three-quarters of all sales in the passion assets market. Unlike the upkeep and storage of vintage cars or the cellars needed to maintain the quality of wines and whiskeys, it requires minimal safekeeping to store art that appreciates in value over time. It also stands out as the sole passion investment that doesn’t devalue through usage or consumption.

7. Art Investment with Maddox

Maddox Art Advisory is at the forefront of art investment in London and beyond. With a deep understanding of both the art and financial markets, we offer expert advice to ensure investors make the most informed decisions, whether you are looking to buy art as an investment or seeking the best artists to invest in right now.

For further advice on UK art investment and globally, download the Maddox Investment Guide.

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The value of investments can go down as well as up. Past performance is not a guarantee of future performance. Fees, Terms and Conditions apply. Please seek your own financial advice before purchasing.