Art as an investment - what you need to know

According to various global art reports, you can achieve an average annual growth in value of around 10% by investing in the works of top artists. Czech secondary market annual review Artplus reports a similar figure. Prices for investment-quality art continued to rise last year despite an overall decline in auction sales. Over the past decade, these artworks have comfortably managed to beat inflation.

It turned out that the price of art does not necessarily rise or fall with the development of the stock market but follows rules of its own. Therefore, art offers a unique way to diversify a wider investment portfolio and one of the less risky ways to invest funds. This confirms Jan Hlavsa, founder and head of Fondee investment platform: ‘Acquiring art is a great way how to diversify your investment portfolio. If a person is familiar with art, enjoys it and can hit the trend, they can make an interesting profit. A great advantage of owning a physical work of art is the possibility to place it at one’s home, which, in addition to the monetary benefit, brings also pleasure and joy to the collector.”

Approximately 10-20% of the investment portfolio is recommended to be invested in art. “When we were students, we bought a lithography by Oldřich Kulhánek, which have increased in value very nicely over the time. We continue to invest in young artists as we believe they have a potential for decent appreciation. And if they don’t, we have a nice painting hanging on our wall,” adds Fondee co-founder Eva Hlavsová, former vice president for investment risk analysis at Morgan Stanley. It is also wise to diversify the collection itself, because like any other market, the art market has its fluctuations. You should also not expect to make a profit on art overnight. It is a long-term investment, typically ten years or more. Many people see buying art as a deposit for future generations.

Artists can be divided into three categories according to the level of possible investment risk. The first group consists of emerging artists, for whom the possibility of appreciation is high but relatively difficult to predict. It is important to look at the artist´s development so far, whether they have already had any exhibitions or won any awards, and to be interested in what the artist’s future trajectory will be in terms of their artwork. It is wise to invest in artists before their first museum show, or before they sign a deal with a major brand that will help to boost the value of their works.

Established artists, who have already reached a certain level of significance and recognition on a regional or national, have lower financial return, but these artworks maintain their value in the passage of time. The third and final category consists of first-class or blue-chip artists, who are well-known internationally. The price of their work is already high as they have built themselves a stable market but shall guarantee you a stable annual return. With this category there is a need to be careful about art forgeries.

Paintings continue to remain the most common works of art to invest in. However, works on paper are beginning to gradually increase in popularity, especially limited editions of art prints signed by the artists. These prints are also a very affordable way to buy an original work. “Even multiples can gain value over time, especially if you manage to discover the future Picasso,” says Barbora Půlpánová of EduArt Experience smiling and continues: “It is crucial to know how the art market works and to have access to behind-the-scenes information.”

If you are already successfully investing with Fondee and would like to gain more insight into the workings of the art market, take advantage of the 10% discount on the EduArt Start programme, in which we turn novices in the art world into collectors.

In case you have already invested in art and have been considering other type of investment, we have a special offer for you from our partner Fondee. Use the code FONDEE4EDUART to try this digital investment platform for three months for free. Please note that you have to consider not only investment opportunities but risks as well.

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