How to invest in art: The risks and rewards

Why should you invest in a work of art?

Investing in a piece of art can be a complementary strategy to your traditional investments. This kind of alternative asset can help diversify your portfolio and increase the value of your estate. Not only will you have the pleasure of enjoying your art – and perhaps even building up a collection – but you could also benefit from significant tax benefits. 

What are the risks of investing in art?

The main disadvantage of this kind of investment is its lack of liquidity. If you want to resell a painting or a sculpture, you can’t expect to get your money back as easily or as quickly as you would with other assets. Everything depends on the art market, the appreciation of the work and the popularity of the artist. That’s why it’s important to get the right information from specialists before making a purchase. 

When it comes to art, you can find some excellent deals and some not-so-good ones. For your purchase to be profitable, you need to view it as a long-term investment. And as with any investment, the risk of resale at a loss can’t be ruled out.

What are the different types of art you can invest in?

In the art world, pieces of artwork are divided into four main categories:

• Ancient art: This covers works created before the modern era, including ancient, medieval, Renaissance, Baroque and classical art as well as other artistic movements that characterized history until the 19th century. 
• Modern art: Encompassing works from the end of the 19th century to the middle of the 20th century, this category includes movements such as Impressionism, Cubism and surrealism, which rejected tradition to explore new forms, techniques and perspectives.
• Contemporary art: Ranging from the 1950s to the present day, contemporary art explores a variety of forms (installation art, performance art, conceptual art) and explores social issues and art history.
• New art: This sub-genre of contemporary art focuses on the creations of living and up-and-coming artists who explore new practices and emerging trends (such as digital art and non-fungible tokens) while reflecting on the major issues facing the world.

Which works of art make good investments?

To make a good investment, you need to focus on works that have the greatest potential for growth. Since an artist’s reputation is a major factor in this, consider criteria such as:

• Their influence in the art world 
• Recognition by their peers and the media 
• Their standing in the art market

You run less risk when you buy works by artists who have a detailed track record and are featured in well-known collections.

How do you assess the value of a work of art? 

To get a rough idea of an artwork’s value, there are numerous auction sites you can consult. To put a specific price on a work, however, you should have a specialist conduct an appraisal.

The art market is unique, and it’s influenced by a number of factors. Of course, there are the renowned artists such as Pablo Picasso, Leonardo da Vinci, Jean-Michel Basquiat, Andy Warhol, Claude Monet and Banksy, all of whose art is worth millions of dollars and increases in value every year. This isn’t the case for most artists.

Here are the elements that can influence the value of a piece of art:

• The artist’s biography and professional career
• The private or public collections that contain their works 
• The art centres and museums that have exhibited their work 

The aesthetic qualities of a work can also contribute to its value as well as the time at which it was created. For example, some paintings by the great Quebec artist Jean-Paul Riopelle are more sought-after than others because they were produced at a specific period in his career. That’s why simply collecting “a name” isn’t always the best strategy. 

To make the right choices, it’s a good idea to research artists’ careers by visiting museums, art fairs and art galleries, and reading art books and magazines.

How do you buy a work of art?

These days, you can easily buy art online. But before you make a purchase, it’s a good idea to see the work in person. It’s also a good idea to rely on the expertise of art market specialists, who can guide you in making the right investment at the right time. 

Visit art galleries

Gallery owners, as well as other art professionals, can explain how artists work and help you find the pieces that speak to you the most. Take advantage of their sound advice, bearing in mind that their job is to sell art. You should also be aware that not all galleries are on an equal footing. Before making a deal, find out about its reputation and the reputation of the artists it represents.

Hire an art acquisition specialist

Art acquisition specialists are experts in their field. They’re called on by businesses and novices alike to build up various types of collections, depending on their areas of expertise. In addition to sharing their network of contacts in the art market, these specialists can help you select individual pieces and negotiate their purchase. Their compensation may take the form of fees or commissions on purchases. You, not the gallery, will have to pay these fees. 

Visit auction houses

You can also buy works of art and other collectables at auctions. Auction houses act as intermediaries between the owners of these items and the public. They establish the provenance and authenticity of items, advertise them in catalogues, organize exhibitions and auction events, and deliver them to the people who buy them. In exchange for these services, they receive a commission on sales.

What are the costs involved in buying a work of art?

If you choose to invest in a work of art, you should note that you’ll have to pay more than just the purchase price. 

You should also expect to pay for: 

• Authenticating the work 
• Transport and customs
• Insurance 
• Conservation
• Security

What are the tax benefits of investing in a work of art?

Investing in art can also come with tax benefits. For example, if you’re in business and acquire a Canadian work of art to decorate your workplace, you may be able to claim an annual capital cost allowance from both levels of government.

Alternatively, if you donate a work of art or collector’s item to a museum or charity, you may be eligible for a tax credit. Since conditions vary from one level of government to another, it’s a good idea to check with your tax advisor.

Investing in a work of art takes time, patience and the expertise of skilled professionals. Before taking the plunge, take the time to get informed so you can seize the right opportunities at the right time. Our wealth management team can help you draw up an investment strategy.