Art as an Investment

Throughout history, art was seen as a marker of civilization. Our ability to make art is really what separates humans from all other species on this planet. People have used art for everything from entertainment to fighting corruption. Now, art is also a business. The entertainment business, which includes music and movies, is one of the biggest industries in the world. So is fashion, another art-based industry. Though artists have traditionally been stereotyped as poor, struggling individuals, it’s possible to make big money with art. Think of names like Stephen Spielberg, Beyoncé, Jeff Koons, Stan Lee and Margaret Keane. They are artists who made millions with their art.

color-artYes, art can be profitable. And not all who make money from art are artists themselves. Most artists become rich and famous thanks to investors backing their works. Those summer blockbusters, the Frida Kahlo paintings in New York galleries, and even music tracks are possible because of non-artist investments. Traditionally, paintings were seen as a good way to invest money, and it still is. It’s not unusual to hear of billionaires spending millions on paintings by artists you may never have even heard of. But, is investing in art just for the rich? Can regular folk invest in art like paintings, sculptures or music?

What is Art that is Worth Investing In?

The term art covers a wide variety of works. It’s also up to interpretation. Some people consider graffiti art, while others consider graffiti vandalism. Investors normally will not invest in a portion of wall covered in graffiti in downtown Vancouver. However, what if the graffiti was signed by Banksy? The enigmatic Banksy’s graffiti-slash-art has actually been sold for millions of dollars.

Therein lies the inherent conundrum with regards to investing in art. Exactly what is considered art? There is high art and popular art. High art is work traditionally considered to be great works of art. Paintings by Picasso, music compositions by Bach, and sculptures by Donatello are considered high art around the globe. However, there’s also popular art. Banksy’s graffiti mentioned above is a prime example.

If you want to make money from art, you need to put your money where either the acclaim or popularity is. Acclaimed artworks have a longer lifespan in general. Popularity can fade. Art that is both popular and acclaimed is an excellent investment.

What Kind of Returns Can an Investor Expect?

The returns for investment can widely vary depending on the type of art being invested in. For example, if you invest in a summer blockbuster superhero movie, you can expect immediate returns following the release of the movie. You can expect to make money for several years afterwards from extended screenings, DVD and digital sales. On the other hand, if you buy a painting by Picasso, you will not be making cash returns immediately. You can display the painting in exhibitions and make a profit. However, art like paintings add to your overall wealth. You should consider whether you want immediate cash returns or wealth with your art investments.

Is it Wise to Borrow Money to Invest in Art?

People did not traditionally borrow money to invest in art. Usually, people with money invested in art. However, the art world offers many options even for amateur investors. Whether it’s wise to borrow money to invest in art will depend on the type of art.

Think about the summer blockbuster superhero movie mentioned above. It generates immediate cash returns. If you have borrowed money to invest in a movie, you will have immediate profits to repay the loan. Therefore, some types of art, like movies and music albums, which generate immediate cash revenue, are suitable for investing in with borrowed money. However, you should have a good understanding of the profitability of these types of art. Not all superhero movies are popular.

Other types of art, like Picasso paintings or a sheet of music Mozart wrote a symphony on, do not generate immediate cash revenue. You can borrow a million dollars to buy Mozart’s sheet of music. However, you cannot realistically expect to hold an exhibition and make a million dollars plus interest to replay your creditors. These types of art therefore are not suitable for investing in with borrowed money. Rather, they are good options to convert your cash into valuable assets to increase your overall wealth.

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