Avoid These Risky Investment Ideas (3 of 10)

Artwork: What Traps People

Artwork today has turned from mere art to a now thriving industry, and through this industry, there are many who are looking to leverage art in their own way. From the artists themselves making the art, all the way to the investing side of things.

This industry has attracted tons of people and it makes sense. Artwork today – especially pieces from Banksy and Damien Hirst – can sell for millions of dollars at art fairs in various cities year after year. And while the pieces are impressive and are deserving of the value, you run into a lot of issues when you turn to the investing side.

As we have mentioned above, there are many people looking to profit off of art. You’ve got consultants and advisors who will manage your art investments for a fee and work for you much like a stock broker would. But the issue with the industry is that price points for art aren’t always as precise like a stock. As Artnet explained once “the work of just 25 artists generated almost as much money at auction as the work of thousands of other artists combined”.

So not only are you entering into a competitive market, but you may be paying top dollar for a piece that is worth a quarter of what you paid for.

The Dangers Of Artwork

On top of those clear problems, the market is also a target for fads and frauds. This problem is amplified by the fact that it’s hard to trace provenance, a record of the artwork’s owner.

And even if you could properly identify who the artist is and attract enough of a following and high prices, you still have to cash in those gains. This comes to another issue of the industry: artwork is not that liquid.

Artwork doesn’t sell like stocks and takes a massive chunk of time and fees before you see any kind of money from it. This rule even applies to those who have a solid relationship with galleries as well.

In the end, you are much better off buying art for the sake of liking it and putting your investing money into securities.