Alternative Investments Explained: Art

I may not know art but I know what I like. So goes the famous saying from Orson Welles. But even if you agree, that does not mean you cannot be an art investor – and be successful at it.

Like many commodity investments , art involves a simple principle: buy low, sell high. As with products such as fine wines, values of the product will go up and down over time, depending on the wider market. The secret is learning how to read the signs – or finding someone to read them for you.

Art investment is a more difficult market than most to penetrate, or it has that reputation. News stories will report soaring values of particular artists or paintings, while high-profile auctions, attended by celebrities, artists and wealthy buyers, make the sexy appeal even stronger.

The majority of the headlines tend to go towards contemporary art, but the sector is also one of the most volatile due to the attention, demand and – occasionally – controversy it stirs up. But Oscar Wilde’s maxim remains relevant, regardless of type of art; as a physical commodity, art investment can be enjoyed aesthetically by the owner, and can also be held for a long period of time as insurance again more volatile stock markets.

The people potentially buying your painting may have changing tastes or interests. And this is what dictates the values of art: demand, or perceived value.

Andy Warhol may be popular one year, undesired the next. These trends can then affect the value of other paintings in a similar vein.

Perhaps the best practice is therefore the same as most investments: diversify. Spanning your portfolio across fine art to modern art can protect against any major fluctuations, while areas such as porcelain or sculpture could also prove profitable.

Whichever period(s) you end up targeting, the advice of an expert is indispensable, with knowledge and trust the most valuable assets they can offer. And remember: buying art that you enjoy, whether you know it or not, will at least mean that you invest in something you like. In that sense, you will always end up richer.

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