There is a quote from stock-guru Warren Buffet, often repeated by Crypto-advocate Michael Saylor that goes; “If you wouldn’t hold it for 10 years, you shouldn’t hold it for 10 seconds”.
The lesson of this quote is just as valid when applied to your art collection. As such, you should be looking for art that will appreciate over the long term, with 10 years being a decent benchmark.
Why ten years?
For one, you are likely to be more cautious of the type of art you choose to purchase when you are investing with a long time frame in mind. Consequently, you will be less susceptible to following trends in art which can pass quickly (and before you have a chance to reap any return).
While the 10-year rule is a good guideline, it may not suit the needs of every investor. There are several factors that you should consider when determining how long you should you hold onto your art collection or to a single artwork in particular, including:
- How does art investing fit into your overall investment strategy? (i.e., Will you need a lump sum of cash for a house deposit within the next few years? Or, what is your investing risk profile?)
- Are you holding all your investments to retirement?
- Will you be selling your art collection piecemeal or as a whole?
- Through what methods will you part with your collection?
- Are you investing in art to hedge against economic downturn or uncertainty?
- Do you collect the art of emerging or established artists?
Once you can answer these questions, you will develop a better understanding for how long you want to hold onto your art investments.
While thinking forward 10 years is a highly recommended strategy, you should keep up with developments in the art world that could destabilize or interfere with your possible returns.
Regular thought and reevaluations should be given to when is the right the right time to ‘let go’ of an artwork. Three important factors that may throw a spanner in your 10-year plan include:
- Take note of how hot the market for an particular artist is running (e.g., Yayoi Kusama and Kaws are perhaps currently priced at a long-term peak. If you have an item of theirs, you may want to sell within the next 2 – 3 years).
- A Blue-Chip artist may have passed away recently and you may want to sell while media attention brings focus to their work, and demand (and prices) spike.
- A once popular artist’s reputation could marred in the court of public opinion, or simply falling out of favor with collectors tastes.