The Theory of Art Investing

You’ll often hear that there is no intrinsic monetary value in art – that it is a false market – and this is true only insofar as there is no intrinsic monetary value in anything. Gold, even, has its price set not by any a priori means but as a result of many market factors that ultimately obscure any sort of platonic “goldness” that may have otherwise dictated value. Some believe that prices are actually a complex reflection of the a priori value of something. Despite which is true, one thing remains the same: The monetary value of art, as with everything, is the price that someone is willing to pay for it.

Having established this, let’s learn how to invest in art.

Buy Low, Sell High – A More Precise Look

The goal with art investments, as with most investments, is to buy low and sell high. But all low prices are not the same. To be more precise, you want art that has a price lower than what you can expect to sell it for. If art is priced low because it is of low quality, you probably aren’t going to sell it high, if at all. But how do you know if art is or will be worth more than what it is selling for?

There are several factors at play that ultimately dictate what a work of art will sell for. Watch the trends. One reputable artist selling well can actually raise the prices of works by artists in the same or similar style. Knowledge of art history and art trends will help you here. Don’t forget about social trends. As certain social trends spread, what art starts selling well? If you get ahead of the curve, you can make good money. After a trend has been established for awhile, however, your ability to profit begins to shrink as buyers and sellers start to recognize the current worth. You will no longer be able to buy low because all of the prices are all high due to the popularity.

The key is to get ahead of the trend, buy it before the trend gets big (buy low) and sell it when the trend is in full swing (sell high).  This is all very easy to understand, but difficult to master. Check out some Practical Tips for Art Investing to help you put the theory to use and get the most out of your investment. Still have questions about the validity of art investing? Read Why Investing in Art is Actually a Good Idea.