While any artwork carries investment risk, it can be said that some are more likely to produce unfavorable returns for a collector than others. In this respect, I have devised a list of the 3 kinds of artworks that art investors might like to avoid to decrease their chances of investing in duds.
Artworks from Auction
I typically suggest that art collectors avoid purchasing from art auctions because the Buyers’ Premium fee that an auction house charges buyers will eat into the potential ROI (Return On Investment). Buyers’ Premiums can be a significant percentage of the hammer price on an artwork acquired at auction. As an investor, you want to minimize your input costs as much as possible, and every extra dollar you spend on acquiring an artwork will have to be made up for (and then some) when it is time for you to sell.
For further reasons to consider, please read What You Need To Know When Buying Art At Auction.
Artists With No Name
The likelihood that an artist ‘makes it’ and becomes highly prized/priced is incredibly slim. So to minimize the chances that your art investment’s decline in value, I suggest you avoid buying artwork from artists with little to no industry reputation.
This strategy does not discount up-and-coming artists (emerging), as these artists typically have a small amount of industry recognition in their early careers. Emerging artists can be a fantastic investment opportunity if you get in early enough, and they go on to fulfill their potential and ‘make it.
The artists that I think fall into this category to be avoided are
- Small regional artists with no name recognition
- Have never been selected as a participant in an art competition
- Producing work heavily inspired by more recognizable names
By all means, purchase whatever art you like, and support whatever artists you want to support. But don’t do so with the idea that it will turn into a worthy investment.
If you think you have found a bargain, take a moment to second guess your presumption. For example, you may think you have found a severely under-priced artwork for sale from an obscure online gallery or small auction house.
In times like these, it is good to remember that, as an investor, you are competing against other investors for artworks, some more knowledgeable than you and some less knowledgeable.
Keeping this in mind can help undermine the thought that ‘only you’ have noticed this bargain and avoid pursuing bad investments. Because, in reality, many other investors and collectors would have likely encountered the same work as you and devised that the artwork is not, in fact, a bargain.
You May Also Like:
Check out Masterworks and Yieldstreet to explore art funds that let you purchase shares in million-dollar artworks from blue chip artists like Banksy, Kaws, and Yayoi Kusama.
Read more: Art ETF: Masterworks vs. Yieldstreet