Ten secrets to successfully investing in art

A boom in the global art market has resulted in some eye-watering sale prices in auction houses and galleries around the world, with new collectors understandably keen to capture a slice of the pie that offers both cultural and financial appreciation.

But inflated valuations, hefty (and highly negotiable) commission fees, rapidly changing aesthetic tastes and forgeries are common pitfalls that even the most savvy collector must work hard to overcome.

All this against the background of a market that is notoriously opaque and widely unregulated.

So how do you build an art collection that does more than please you aesthetically?

1) Buy Deep

Try to collect several works by a select group of artists, rather than diversifying your collection too widely. There’s no merit in buying one of everything on a tick-list. A valuable collection is worth more than the sum of its individual parts.

2) Do your research

Read up on the artist, check their CV, check past sale results on auction houses and third party providers to gain a better insight into their future prospects.

3) Buy what you love

Acquire works that appeal to you artistically. There is no telling how the market will react, it can be fickle and you may need to keep the piece for years, so you need to love it.

4) Know your market

It can help you understand why fluctuations in one artist will impact another, and help you react accordingly with the works in your own collection.

5) Be aware of the risks

The contemporary art remains the most volatile market – and also the one that can provide the biggest financial gains. But you need to buy and sell wisely, and make sure your pieces are authenticated properly.

6) Always buy the best you can afford

All artists have less impressive works. The real value is in the quality of a particular piece, not just the name of the artist.

7) Buy low and sell high

It is obvious, but still merits saying. Sell when the market values a piece more than you do, and buy when you value a piece more than the market does.

8) Play the long game

Keep an eye out for “burned” pieces (works that have failed to sell at auction). These can be bought for a heavily discounted price, and re-sold for a fair market price – if you’re prepared to hold it for a long period before returning it to the market.

9) Do the maths

Calculate possible profits or losses for an investment then compare them. The more volatile pieces can be significantly more profitable over the long term, and worth the risk of investment.

10) Know your competition

Use new databases and your own research to find out who else owns an artist you want to collect. Knowing who else collects that artist, which museums that artist is in, and which curators like the art should all inform your buying decision.