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Having some paintings can help diversify your investment portfolio, but it is important to understand the risks as well
With the option of purchasing paintings online, it has become possible for even the common man to invest in paintings. Moreover, there are a wide variety of resources, including AI platforms, that can help choose paintings with potential for growth. To understand whether you should invest in paintings or not, let us take a look at some of the pros and cons.
Why should you invest in paintings?
Value appreciation – If you choose the right paintings, there is scope for significant appreciation in valuation. While paintings from renowned artists may be costly, you can invest in paintings created by emerging artists. The latter ones are likely to be cheaper and hold potential for high value appreciation.
Not affected by economic ups and downs – Unlike stocks and bonds that may be impacted by economic factors, paintings are less likely to see a change in their valuation. That is why paintings are considered a good means to diversify your investment portfolio.
Aesthetics and status symbol – Paintings are not just about investment. They can also be an expression of your personal beliefs and your life experiences. In this context, a painting may work as an emotional healer or something that provides you inner peace and strength. A painting can also be used as a status symbol, something that you can display in your home or office.
Wealth creation – Assuming that you choose the right paintings, the rate of value appreciation can be much higher than the rate of inflation. This is why paintings are often considered as an effective hedge against inflation.
Global demand – With the right paintings, you can access a global market of collectors, museums, art galleries and other investors. With consistent demand, you will not have to face problems when it comes to selling the painting. With the right paintings, liquidity will not be an issue. You can sell anytime you want.
Why should you avoid investing in paintings?
High volatility – While investing in paintings can be profitable, there are risks as well. Considering that you are buying paintings created by emerging artists, there is no guarantee that prices will appreciate. In such cases, you are essentially placing a bet and not actually doing a proper investment. Valuation of paintings created by renowned artists are relatively more stable. But these can be costly and not accessible to the average investors.
High transaction costs – Another issue is the high transaction costs associated with the buying and selling of paintings. So, unless you are booking big profit margins, the high transaction cost will limit your overall profits. Leading auction houses such as Sotheby’s or Christie’s charge anywhere from 10% to 25% on the buying and selling of paintings. This can be a major hurdle in ensuring adequate profits.
Maintenance cost – When buying paintings, you also have to invest in its upkeep and maintenance. This can be an additional cost burden. If you do not take proper care, the paintings may deteriorate. This will adversely impact their valuation when you try to sell them in the market.
Problem of fakes – If you are looking at investing in paintings, you will also have to deal with the problem of fakes. You have to be an expert yourself or hire a professional to ensure that the painting is real. To avoid fakes, it is recommended that you buy from leading auction houses and reputable galleries. Most of these have an online presence as well. So, you can buy easily from the comfort of your home with the guarantee of authenticity and door delivery.
