Is Investing $1,000 In Art Safe For Me?

November 16, 2021

When we think of investments, the natural reaction for most of us is to think about stocks and shares, interest rates and complex numbers, and terms such as “appreciation and depreciation”. While these are undeniably important aspects of investing, the concept has changed and evolved in recent years, growing to encompass a wide range of products and services. Interested parties can now invest in a wide number of items, including whisky, land, architecture – and art.

While once considered the preserve of the elite, art has become a popular investment option amongst a range of interested investors, with something available for every budget. If you are working with smaller figures – such as a thousand dollars, you can still enjoy a healthy potential profit – as long as you remember some clear guidelines to keep you on track.

Do Your Research

When making any investment, thorough, detailed research is always important – and this is particularly true when you are considering investing in art. If you do not have a background in the subject, this can be something of a learning curve. However, it is well worth putting in the time and effort. You should make sure that you have a basic understanding of the main terms and phrases used across the art world; the difference between acrylics and oils, or landscape and arcadia, for example. It is also a good idea to appraise yourself of a brief history of art. While there is no need to enroll in college and take a formal class, having a broad understanding of the main periods, movements and figures will help you gain a better understanding of why certain artworks are more valuable than others.

Artists are also important – as a general rule, the most valuable artists are those who have already died, though there are some important exceptions. The rarer the artwork, the more valuable it will be, and so a deceased artist – who will never produce another piece – will often be considered a better investment than one who is still living and could create a mass-produced exhibition tomorrow. Get to know curators and gallery owners – they are a wealth of information and useful knowledge – or use the vast array of resources on the internet to help you stay informed.

By ensuring that you have a solid understanding of basic art historical terms, movements, periods, and figures, you place yourself in a solid position and increase your chances of making a successful investment.

Be Wary Of Trends

In most cases, the most valuable artists are often considered to be those who are dead – but this is not always the case. As with any market, the art world can fluctuate and change wildly depending on trends and fashions, and sometimes, this can occur with a “trendy” new artist who is billed as the next big thing. This usually occurs when an artist has produced a particular piece that quickly garnered a great deal of attention or controversy. Following the exposure, their art can become increasingly valuable – but this is a trend that can die off as quickly as it arrived, often leaving investors at a loss. While this is less of an issue if you have big bucks to invest, it can become a real issue if your starting price is only a thousand dollars. When you have a lower budget – and particularly when you are new to the world of art investment – the safest bet is to take your time, speak to experts, and do your research.

Don’t Spend More Than You Can Afford To Lose

This is always an important element of investing, and ultimately should underlie almost every financial decision you make, no matter which area you are investing in. When it comes to art, there can be a temptation to overspend, largely due to the visual nature of the product. If you see a painting or sculpture that really captures your attention, it can be easy to justify stretching your investment too far, in a way that just does not happen with plain old stocks and shares. Despite the temptation, you must be strong – set a budget, and stick to it. Going beyond your limits as a newbie can be dangerous, and lead to a sticky financial mess.

Network, Network, Network

As a new investor, experts are going to be your new best friends. Gallery owners and workers, curators, auctioneers and auction house staff, artists, and art consultants will all have a good current understanding of the art market and can steer you in the right direction. Tell them the budget you have to work with, and they will be able to introduce you to works and artists which may be a good fit, as well as offer professional advice on the profit you can expect to make. Ensure that you are a frequent face at exhibitions, art fairs, and gallery openings – not only does this help to improve your knowledge and make sure that you are up-to-date with the trends of the market, but it also helps you become a familiar face. Never forget to be kind, gracious, and polite to everyone you meet – you never know when a gallery owner will have the perfect piece arrive, and place you at the top of the list for who to call first.

Don’t Forget The Extra Costs

When investing in art, you must be aware that there are a number of additional costs that you can expect to incur, even after you have purchased your artwork. You may need to pay for transportation from the gallery or auction house and have somewhere suitable to store the piece. Do you have a space in your home with the right lighting and temperature controls to safely store your investment? Remember, in order to make a profit on your piece, it needs to remain in the condition it was when you purchased it – any damage or fading will have a negative impact on the resale price. Make sure that your home can accommodate the piece before you make your investment, and that you have a secure method to transport the piece.

In addition, you will need to research the price of insuring your piece. This can vary drastically depending on the perceived value, your location, the conditions in which the artwork is kept and so on. In some cases, the insurance can prove to be fairly pricey, so make sure that you are prepared to pay out, and have the cash on hand to spare. Essentially, you need a good understanding of just how far your 1k will go – is that the budget you have for the painting alone, with the ability to afford additional expenses on top, or does that 1k need to cover everything else, in addition to the actual purchase? Having this distinction clearly set out in your mind will give you a good indication of how much you actually have to spend, and the kind of pieces you need to be looking at.

Trust An Expert

If you do not feel confident enough to go it alone, you may consider using one of the professional art investment companies that have sprung up in recent years. These companies employ experienced art investors, all of whom have a strong knowledge of the field. In many cases, you will invest your money in a percentage or proportion of a particular artwork, held at a suitable secure unit elsewhere. This is great if you are looking for a hands-off approach, and are not worried about seeing your artwork every day; the company will simply take care of everything for you, and offer expert advice on the best ways and times to move, depending on the market.

Final Thoughts

Investing in art is a fantastic way to try something new, gain real enjoyment from your investment, and diversify your portfolio. Investing with 1k is perfectly safe – as long as you remember the basic rules and advice, take it slow, and do plenty of research – in the art game, knowledge truly is power.

Masterworks is a fintech company democratizing the art market. Our investors are able to fractionally invest in $1mn+ works of art by some of the world's most famous and sought-after artists.