How to Become an Art Investor
Liam Parker
Updated on March 29, 2026
People investing in art have found it to be a stable investment in times of financial crisis because it is not directly tied to the stock market. However, for many people, it is a difficult investment to understand. Here is information you’ll need to know to be a successful art investor.
A Short History in Art Investments
Ten years ago, the art markets were worth half of what they are today. The growth of value in the markets has attracted more investors. Art is not only beautiful but can also provide its owner with immense value in terms of profit.
In the 17th century, one of the earliest bull markets in art occurred as the urban middle class’ demand for art spiked. In the 1800s, more regions followed suit as industrialists and business owners acquired a taste for art. And, as the middle class grew, art ownership increased. In contrast, the wealthy preferred to keep the works they bought.
How to Find Art to Invest In
There are different locations that one can buy art from, from New York to London . London is one of the epicenters of the art world where people from around the world gather to share their love for art at auctions. While there is a lot of money to be made in the markets, buyers are reminded that the bigger profits are at the top – usually requiring heavier investments.
Art follows money. Those who seek to make money in the sector are more likely to make a higher profit if they have more funds to invest with. Unlike other luxury objects such as boats or cars, art increases in value.
Seasoned art collectors take several factors into consideration when buying art. This includes the profiles and tastes of the elites of tomorrow. As there is a drive in the demand for art, many collectors pay close attention to how tastes change over time.
How to Be a Successful Art Investor
It is difficult to figure out the next trends in such a huge market worth billions of dollars. In many senses, the market for art is opaque. It is difficult to gather accurate data about the prices in the market. This is due, in part, to the fact that a lot of buyers conduct sales in private.
Masterworks has a treasure trove of research and market analysis on investing that makes it easier for buyers and sellers of art to align their strategies with the realities of the markets. It is the first company that allows investors to purchase shares in works by legendary artists such as Picasso and Warhol.
The organization was founded in 2017. With as little as $1,000, investors can buy into top-tier works in the art world. Masterworks has worked closely with the SEC (Securities and Exchange Commission) to ensure that users of its platform can invest in confidence, knowing that regulatory support is in place to mitigate the risks of their investments.
Masterworks simplifies the process of how to become a successful art investor. Its processes are structured to maximize user experience while also ensuring that regulations are adhered to. After purchasing a painting with its own capital, Masterworks files an offering circular with the SEC. Investors may buy shares in the painting after the offering is qualified by the SEC. Profits from the sale of the painting are distributed among investors .
Of course, before making any investment you should always do your due diligence. Talk to investment professionals and research returns online. Getting the best information to make an informed decision before buying a piece of art is the best way to go.
Should You Consider Investing in Art?
Investing in art certainly isn’t for everyone. The only people who should even consider this type of investment should have five figures in “extra” cash that they don’t mind being tied up in a physical piece of art. Investors should also be aware of the possible risks and returns associated with this type of investment.
In addition to needing a sizable amount of money to invest, people looking to put money into the art sector should also be aware that not every piece of art provides the same return. While they’ve historically maintained or appreciated in value, not all pieces of art do. It also shouldn’t be expected to see huge returns on your art investments.
On average, the return on art investments sits around 10.6 percent. This means if you invest $10,000 you’ll get a return of about $1,060. Individuals who are looking for more aggressive returns should consider another type of investment. It is also possible that the piece of work you buy doesn’t appreciate in value at all. You may even lose money attempting to sell it.
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The art market has grown steadily and significantly since 1950, with very low correlation to other asset classes. It has even managed to grow during one of the worst economic downturns of our generation – beating most other investment classes.
Sothebys Mei Moses Index
Source: Sothebys.com
For those new to the art market, it can sometimes feel complicated, even overwhelming. Where to begin?
At Banditto Art, we believe that great contemporary art should be easily accessible for collectors from anywhere in the world, so we provide clear, unpretentious art investment advice to our clients.
Collectors get access to upcoming artists and artwork at affordable prices. Our network allows us to source the best works from the most promising international artists.
Why not take the guesswork out of the navigating the contemporary art market, by allowing us to guide you to make the best possible use of opportunities available, enabling you to get the most out of your investment.
What Is Permanent Residency? | What Is Residency by Investment? | Why Do People Invest in Permanent Residency? | What Do Countries Gain From Residency by Investment Programs? | Which Countries Offer Residency by Investment Programs? | What Are the Requirements for Obtaining Permanent Residency? | What Can Arton Do for You? | What Makes Arton Different? | Arton’s Program Tools | Residency by Investment Timeline
What Is Permanent Residency?
Permanent residency is a visa status that allows the bearer of the PR card to legally reside in the host country without being a citizen of that country. Permanent residents are entitled to live, work, go to school and access health care in the host country. However, they are not typically entitled to vote or run for office.
In order to be eligible to apply for permanent residency status in any given country, individuals usually have to meet certain requirements, such as having work experience in the country, having studied in the country and speaking the language. Since 1986 investment has been another way to gain permanent residency. PR status can also lead to citizenship by naturalization provided the resident has lived in the country for a certain number of years.
What Is Residency by Investment?
Residency by investment is the process of obtaining a permanent residency card in another country by investing in the economy of that country. PR status is then conferred at an accelerated rate compared to traditional applications.
Why Do People Invest in Permanent Residency?
There are many reasons to invest in a permanent residency, from personal safety to increased global mobility. Permanent residency opens up a world of possibilities to high net worth investors.
Security
Permanent residency in a stable, peaceful country can be life-saving in the event of any kind of political unrest in one’s home country. This type of insurance is priceless for investors and their families.
Global Mobility
Many passports are quite restrictive in their visa-free mobility, forcing citizens to obtain visas whenever they need to travel abroad. Permanent residency can offer individuals from these countries increased global mobility. For example, the passport of China allows visa-free entry into only 58 countries, whereas permanent residency in Portugal allows uninhibited travel throughout the Schengen zone, which comprises 26 European states. The difference in global mobility equals an incredible amount of time saved filing visa applications and is priceless to businesspeople the world over.
See our Passport Index for the visa-free score of every passport in the world.
Business
New business opportunities open up to participants in residency by investment programs as they can now do business in the host country as well as travel abroad more freely.
Tax Management
Permanent residency may prove advantageous for tax optimization purposes. For example, Bulgaria has one of the lowest income tax rates in Europe. This allows investors to manage their wealth more efficiently and effectively.
Family
Most residency by investment programs are available to the family members of the main applicant. This means that investors can secure a better future for their spouse and children. PR status offers access to world-class health care, education and an improved lifestyle.
Education
Education is the foundation of a successful life as a global citizen. Investing in a permanent residency can open up access to the best schools in the world for applicants and their children by qualifying them for domestic rather than international tuition fees.
What Do Countries Gain From Residency by Investment Programs?
Many countries offer residency by investment programs in order to attract much-needed foreign direct investment. Countries can then use these funds to invest in their own economic or cultural projects.
For example, applicants to Portugal may invest in art restoration projects, research activities and more. Investors may also take advantage of Arton’s Qualified Offer to invest in the rehabilitation of an 18th century Palatial House in the city of Porto.
Which Countries Offer Residency by Investment Programs?
Arton Capital is pleased to be an authorized agent for the following residency programs:
| RBI Program | Time to PR | Min. Investment |
| Bulgaria | 6-9 months | €511,292 |
| Canada, Quebec | 36 months | CA$1,200,000 |
| | 3-6 months | €350,000 |
| United Kingdom | 4-6 months | £2 million |
| United States of America | 12-18 months | US$500,000 |
What Are the Requirements for Obtaining Permanent Residency?
Each country has a different set of requirements that applicants must fulfill for its residency by investment program. For example, some programs require that applicants make a certain number of trips to the host country, while others do not. However, some requirements are common to all such programs:
- Have a clean criminal record.
- Show the legal source of the investment funds.
- Invest in one of the government-approved options, such as real estate, government bonds or a national economic fund.
All requirements must be met in order for residency applications to be approved by the host government. See the specific requirements on the individual program pages.
Want to invest in Indian Stock Market? Enroll for the best online Stock Market courses available on online platforms to help you become a smart investor.
Nidhi Gupta
Stock Market Trading is a popular method of investing in short term to become financially strong apart from other less risky modes of investments. For those who want to invest their savings and are interested to learn ups and down of the market trend, tools, timings and which stocks are the best, here are 5 online courses that you should definitely enroll for. Find out the bullish and bearish trend of the market, learn how to multiply your money faster, how to distribute your risk, how to assess risk while investing, know what to keep in mind when going for long-term investment. These online courses will teach you the art of systematic investment how to be a long term investor in this market among millions of players.
Top 5 Online Stock Market Courses
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Course Duration – 9 hours
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To gain the basic knowledge of buying and selling of shares in the market, enroll for this course. Through this course, you will understand that an investor and trader must have future plan and some data to calculate the profit and loss that they might incur in the future. This course from NIFM will provide you insights about the ups and downs of stock market. Learn how to analyse market, planning and execute of buying and selling of stocks.
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Once you have learnt the basics of trading, and you are aware of the concepts, then it is time to operate the Odin Software which is a unique application designed for trading on multiple market strategies. Learn how to do actual trading though this course that charges nominal fee. Several broking agencies have been using this for trading purposes. Apply for this online NIFM course that extends remarkable help in understanding this software.
To build out your circle of competence, you should be doing this
Valuing businesses is something Warren Buffett (Trades, Portfolio) has a tremendous amount of experience with, and any comments from the Oracle of Omaha on the topic are always highly informative.
One approach Buffett has advocated in the past is asking questions to build out your valuation process. He spoke about this at the 2010 Berkshire Hathaway annual meeting of shareholders, when one investor asked him if he could give some insight into how his process into valuing businesses has changed and developed over the years.
Valuation model
Buffett began his response by saying that the most significant development in his investment style over the previous few decades was the move away from deep value, the technique taught by his teacher and mentor Benjamin Graham, toward buying quality at a reasonable price.
He went on to say that the “biggest thing” to understand when valuing businesses is not “how big your circle of competence is, but knowing where the perimeter is.”
You don’t have to understand every single business there is out there on the market. Stretching yourself too thin and trying to understand too much can be detrimental to performance over the long term. If you concentrate on a few companies that you really know and understand well, just as Buffett has done, it becomes easier to make money as it is easier to spot undervalued opportunities. As Buffett explained in his answer back in 2010:
“You don’t have to be an expert on 90% of the businesses, or 80%, or 70, or 50. But you do have to know something about the ones that you actually put your money into, and if that’s a very small part of the universe, that still is not a killer.”
And this is where it pays to start asking questions to extend your knowledge over time. I’ll let Buffett explain this fundamental principle:
“And I think if you think about what you would pay for a McDonald’s sandwich, you think you would pay for — you know, think about the businesses in your own hometown of Olathe. Which would you like to buy into? Which do you think you could understand their economics? Which do you think will be around 10 or 20 years from now? Which do you think it would be very tough to compete with?
Just keep asking yourself questions about businesses. Talk with other people about them. You will extend your knowledge over time. And always remember that margin of safety. And I think you basically have the right attitude because you recognize your limitations, and that’s enormously important in this business. You will find things to do.”
The art of investing
I am a firm believer that investing is not a science — it is an art. And just like all good art, good investing requires lots of practice, patience and continual improvement. Only a handful of artists were good from the very beginning, and the majority have had to practice and develop their art over many years.
The same is true of investors. No one is born a good investor. You have to work at it and develop your skills over many years and decades. One of the best ways to learn and develop your skill set as an investor is to continually be asking questions and developing your circle of competence around certain businesses and industries.
Asking questions is just one of the many ways you can do this, and if you ask the right questions of the right people, they will give you new insights that will be beneficial to your mental models.
It’s all about focusing on what you really know and avoiding making any serious mistakes. One of the greatest mistakes you can make is investing in a business you don’t really understand. Luckily, you are never under any obligation to invest in any business.
Disclosure: The author owns shares in Berkshire Hathaway.
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There’s a chance that the painting you bought to match your sofa may increase in value over a time, or it could still be worth next to nothing after sitting in storage for decades. When it comes to investing in art, you are dealing with a fickle market that has no guarantee of profitability, and holding such illiquid assets can often mean that there’s a thin chance of quick returns.
But with galleries and online art marketplaces expanding rapidly in recent years, art investment certainly has its charm. We spoke to Talenia Phua Gajardo, the founder of The Artling, about Hong Kong’s art market environment and how to make smart investment decisions.
Art Investment is certainly very different from just appreciating art. What are the things people who are looking into art investment need to know?
The one thing to bear in mind is that an ROI can never be guaranteed and passion counts for everything. New art buyers should get started by trying to gain an understanding of the art market. While it may seem daunting, there are countless resources that are readily available both online and offline.
Things to take note of are the different parts of the art market. For example, the difference between the primary market and the secondary market; commercial and non-commercial, and emerging artists and established artists. It is vital to know what you are buying and to make informed decisions before starting to make acquisitions. A budget should also be set aside to begin with and one should attend as many gallery and museum shows as possible.
What do you think about the Hong Kong art scene? Is it a promising place for collectors?
With more mega galleries such as David Zwirner setting up his outpost in Hong Kong, collectors are gaining even more access to Western galleries and their presence is an indication of their confidence in the market. The newest addition to the art scene in Hong Kong is H Queen’s, an upcoming space that has been specially designed to house art galleries and exhibitions. M+ and Tai Kwun, Hong Kong’s Centre for Heritage and Arts, are also slated to open very soon, adding even more appeal to the scene.
Story continues below
- How Art Investment Works
- How To Build An Art Investment Portfolio
- Why European Mansions Are Smart Investments
Any emerging artists in Hong Kong art investors should have on their watch lists?
Where should art investors go to find their art in Hong Kong? Or any particular shows art investors shouldn’t miss?
Hong Kong has a vibrant art scene, particularly in March when it’s art fair season. Art Basel Hong Kong, Art Central and Fine Art Asia are fairs that you should not miss. White Cube, Edouard Malingue Gallery, de Sarthe Gallery, Empty Gallery and all galleries inside Pedder Building are some of my go-tos.
Auction houses like Philips, Sotheby’s and Christie’s will always be good to check out, but non-profit art galleries in Hong Kong are also interesting. For example, Para Site, 100ft Park and Things That Can Happen.
Every form of investment comes with risks. What are the risks of art investment?
The biggest risk is making an art investment that brings you little or no returns, and art investors will have to be comfortable with that risk. It is important to make sure that you truly like what you are acquiring so you are not stuck with a piece that potentially has no value in the secondary market.
Art is not entirely immune to market conditions and like all other investments, the value of art fluctuates with collecting trends and are further influenced by world politics and the global economy.
If you wish to succeed in the field of investment and finance, you must know everything that you don’t know. In order to learn the art of investing, the first thing that you must do is list down all the things that you are still unaware of about investing. In the words of Tony Robbins, “One reason people succeed is that they have knowledge other people don’t.” Therefore, the first step to rectifying this problem and beginning to understand investing is by getting the required knowledge. It is a good practice to focus on all those areas about investing that we have little information about. It aids us in “knowing the knowable,” and as a result, we are able to “control the controllable.”
Here are a few tips to learn the art of investing and become a wise investor in the long run!
- The Cautious Optimism Approach
When you are taking your first steps towards making an investment, optimism is a great thing ,but you also need to be cautious at the same time. You must be wellaware of all the pros and cons of making an investment. A good way is to research a lot on the subject as well as get into healthy debates with people to get a 360-degree view on your investment plans. In the end, you need to aim at making informed and realistic choices in order to make sure that you make the most out of your investment.
2. The Threadbare Approach
The threadbare approach is quite popular when it comes to investing. In this method, each component of investing is carefully weighed by taking it apart in order to make sound investment judgments. There are always a few unknown elements for certain aspects of investment. It is also possible that you might not necessarily know about them prior to investing. Therefore, a certain amount of caution must be adopted to ensure good investment solutions. It is the same caution adopted by an alert driver who decides to drive his car on a highway with zero visibility on a foggy winter morning.
3. The Logical Approach
Everyone has an understanding and a perception of how things are going to go in their investments. That said, the actual outcomes and results do not always vindicate a wishlist. Therefore, it becomes essential for investors to appreciate the distinction between the probability and the actualconsequences . If an investor is unable to discern this difference, the problems can quickly start piling up. This logical approach can sometimes be the line between success and failure for an investor.
4.Figure Out Which Group You Are A Part Of
There are two broad classes that investors usually belongto . In the first class, they feel like they know absolutely everything and in the other, the investors are a little more circumspect, cautious and like to stick to “I don’t know” instead of confessing to being a know-it-all. The first class of people also have several subcategories which sumup to people who have extraordinary faith in their abilities and an air of confidence around them. They also know that they can easily achieve success if that is their ultimate motive. In this context, sound investment advice would be “look before you leap.” In order to become a wise investor, you must first figure out which of the two groups you belong to so that you can avoid the possibility of falling into a hole. If you are able to figure this out, it will help you to choose between the Top mutual funds companies. Thus, you will be able to make better financial decisions.
5.Understand “How Not to Invest”
When you are entering the investment world, it is vital also to know “How not to invest” so that you don’t fall into the trap of making a bad investment. Therefore, it is a great idea to start your quest of understanding more about investments by checking up on all the bad decisions that people make while making investments. In this way, you will easily skip making common mistakes. Hence, you will have a head start in your journey to make more informed and good investments that will help you reap great results.
6.Learn from Warren Buffet
Warren Buffet is the investment guru who can give you some amazing directions to be successful with your investments. One of his very profound thoughts on investment goes on to say that “An investor needs to do only a few things right if he can avoid making mistakes.” This can be your mantra for investments. Some of the hidden dangers as highlighted by him comes in the form of regressive or excessive taxation policies, little or a total lack of knowledge and the various psychologies as well as emotions attached to investments. Learning about all this will help you to understand the risks of mutual funds and how you should deal with them. And also, you will be able to understand as to how If these things are controlled, a person can make little or no errors and can be successful in making the right investments that would give them good returns.
7.The Rational Approach
Sometimes, investors also account for all the vagaries that are associated with unpredictability and profitability. A rational investor is one who can capitalize on all the unforeseen events as well as unlikely situations and turn out a winner. An investor can certainly experience hurt and failure by some unexpected forces in the market. This can eventually cause an investor to succumb to the loss, which is why it becomes imperative for investors to be rational throughout the process of investing and profess to a little scope for “not knowing” everything. This brings us back to one of the points mentioned above where you must figure out which group you belong to.
8.The Mantra for Success
And lastly, the mantra for success lies in observing, learning and adapting to the changing tides, all the while being confident in your research and hard work. Let all the investment ideas and thoughts come to you instead of making impulsive investment decisions. Choosing among the Top mutual fund companies might seem to be a big deal to you at the start but, once you get the hang of it, things will get much smoother. That is the best thing you can do to become a healthy and wise investor.
Final Words
There are several mistakes that investors make such as getting greedy or not taking enough risk. As an investor, you should strike the right balance between the two extremities if you wish to succeed as an investor.
by Stefan Aarnio | Dec 28, 2017
Just like the Jungle, there is a food chain of predators and prey in the Real Estate Investor world. There are organisms at the bottom of the food chain like plants and plant eating animals. The organisms at the bottom are plentiful in number and the food they eat is abundant in nature. As we progress up the food chain, the animals become more sophisticated, larger and more carnivorous. There are far less lions in the jungle than there are gazelles because it will take hundreds of gazelles to support a few lions. The world of real estate investing is exactly the same; most investors belong to the herd at the bottom of the pack. They make very little money investing in real estate and are just producing enough money to survive.
How To Be A Real Estate Bird Dog
Conversely, there are a few highly skilled lions in the real estate jungle that are constantly seeking opportunity. These lions look for weak gazelles that can no longer operate and are looking to acquire their properties at a discount. The jungle can support far less lions than gazelles because even the weak gazelles are hard to catch. Whether we are in the jungle in Africa or the real estate market in Winnipeg, Manitoba, there is always the top 1% and the bottom 99%.
Stage 1: Bird Dog – Lead Broker – Marketing Company
The fastest, cheapest and easiest way to get started in Real Estate Investing is to become a bird dog. Becoming a bird dog requires zero dollars to start and your job is to find and build a database of real estate investors. With your real estate database built, you will then generate leads of buyers and sellers and sell the leads to your database. These leads can be sold for anywhere between $20-$100 per lead and more if the leads close. Depending on the size of the business someone could generate $2,000 to $8,000 per month. Some bird dogs create a subscription service where for a monthly fee, they will send other investors lead flow for a flat rate. Leads are the lifeblood of any business, so as a lead broker or bird dog, you can become very valuable to the real estate investment community if you build the business right.
By selling leads alone, someone could earn up to $100,000 a year in your market by selling leads alone. You don’t even have to do any deals, raise any money or close on any properties. You are a marketing company who just sells valuable leads to other investors and stays out of the other aspects of the business.
NEW SKILL: LEAD FLOW AND MARKETING – The beauty with becoming a bird dog in the beginning is that you get to master the most critical skill of being a Real Estate Investor – lead flow. Without leads your business at any level with perish.
How To Generate Motivated Seller Leads
Bird dogs generate leads from:
Locally placed bandit signs aka “We Buy Houses” signs – There are only two ways to sell real estate: local signs and the internet.
The internet – because most bird dogs need to acquire leads cheaply and easily, leads for deals can be obtained by placing FREE ads on classified services like kijiji.com or craigslist.com.
Leads can also be found by combing the Multiple Listing Service (MLS) or other online classifieds. Leads and deals are literally everywhere, but they take work to find and that’s why bird dogs can be valuable.
The real estate business is full of repetitive, monotonous tasks that busy, more advanced investors simply don’t want to do. If you are willing to stick with the grind of lead flow, you will master one of the most important skills required for real estate success.
Success as a bird dog depends on activity and daily actions performed to generate sellable lead flow.
So many real estate investors decide to start their business on a higher more advanced level and never master the art of lead flow. This always hinders these real estate investors in the long run and many have to come back to the beginning to learn how to market for leads properly later in the game if they are still in business.
One thing to keep in mind is that the investors you are selling the leads to will make much more money than you off of these leads. An investor will make $15,000 to $30,000 off of the leads while you are making $20 to $500. Don’t be jealous of the disparity in earnings because:
The investor actually has to execute the deal
The investor has to have the skill set to make the deal successful
The investor has to bring money to the table
The investor has to bring their power team to the table
The investor may have to wait 6-12 months to get paid
Real estate investing is a game where more money and more skills mean more profits. At the entry-level stage of running a bird dog business, you have minimal skills, and minimal risk. This yields minimal profits and you will evolve once you have mastered the first skill of real estate investing – lead generation.
Investing in ITBiometrics
ITBiometrics, Inc. is a USA Corporation specializing in security for online and offline financial transactions using biometric identity authentication.
We manufacture and distribute OEM hardware products with biometric technology for use by businesses, governments, and individuals in high-security use cases.
Our powerful new products, the ITBx, the BCD, and the RemoteTempCheck™ are poised to completely transform identity authentication.
ITBiometrics’ Opportunity for Accredited Investors
ITBiometrics is now announcing our investment opportunity to fund further product development, manufacturing, and an aggressive marketing campaign. Under Regulation D, 506C, we can now accept investments from accredited investors, with a minimum investment of $5,000. Accredited investors can participate by investing in a convertible note that pays 8% per year and converts to our stock at a 50% discount just prior to our planned Regulation A IPO.
Accredited investors interested in investing, please fill this out to be contacted:
ITBiometrics’ Planned Regulation A+ IPO
ITBiometrics has a Regulation A IPO planned within the next twelve months, and even non-accredited investors will be able to invest and have publicly traded stock in our company. If you are interested in being notified when we can accept your investments, please let us know*.
Non–accredited investors interested in investing, please fill this out to be contacted:
* NO MONEY OR OTHER CONSIDERATION IS BEING SOLICITED, AND IF SENT IN RESPONSE, WILL NOT BE ACCEPTED. NO OFFER TO BUY THE SECURITIES CAN BE ACCEPTED AND NO PART OF THE PURCHASE PRICE CAN BE RECEIVED UNTIL THE OFFERING STATEMENT FILED BY THE COMPANY WITH THE SEC HAS BEEN QUALIFIED BY THE SEC. ANY SUCH OFFER MAY BE WITHDRAWN OR REVOKED, WITHOUT OBLIGATION OR COMMITMENT OF ANY KIND, AT ANY TIME BEFORE NOTICE OF ACCEPTANCE GIVEN AFTER THE DATE OF QUALIFICATION. AN INDICATION OF INTEREST INVOLVES NO OBLIGATION OR COMMITMENT OF ANY KIND. [AFTER THE OFFERING STATEMENT HAS BEEN PUBLICLY FILED:] AN OFFERING STATEMENT REGARDING THIS OFFERING HAS BEEN FILED WITH THE SEC. [THE PRELIMINARY OFFERING CIRCULAR THAT IS PART OF THAT OFFERING STATEMENT IS ATTACHED] OR [YOU MAY OBTAIN A COPY OF THE PRELIMINARY OFFERING CIRCULAR THAT IS PART OF THAT OFFERING STATEMENT FROM:
By Katie Hope
Business reporter, BBC News
16 November 2017
It’s a fantasy akin to winning the lottery.
That painting you spotted in an antique shop for a tenner turns out to be worth thousands, or the ugly painting gifted to you by your grandmother and hidden in a cupboard ever since is actually worth a pile of money.
For one investor that dream has come true.
A painting of Christ believed to have been painted by Leonardo da Vinci has just sold for a record $450m (ВЈ341m).
Just under 60 years ago, the very same painting, then generally reckoned to be the work of a follower of Leonardo and not the work of Leonardo himself, sold at auction for a mere ВЈ45.
Even accounting for inflation that’s a pretty dramatic return on your investment.
So is investing in paintings a good way to get rich fast? And how should you invest in art?
“With extreme caution” is the advice of Patrick Connolly, a financial adviser at Chase de Vere.
He says while stories like the Leonardo painting make it seem attractive, such cases are relatively rare.
Mr Connolly says Chase de Vere does not recommend their clients invest in art because the downsides outweigh the upsides.
“It doesn’t produce income or earnings,” he says.
“What you get back is based solely on supply and demand and there are big movements upwards or downwards if there are changes in the economic environment or if particular works or artists come in or out of fashion.”
An exception, he says is for very wealthy people who have a large array of investments and need to make sure they’re not too dependent on one particular sector.
As art has no correlation to the stock market, it means paintings can go up in value even when the market crashes, making it a good diversification for an investment portfolio.
To invest in art as a true investment, he suggests you need a starting fund of at least ВЈ5,000, and possibly up to ВЈ500,000, which can be used to buy individual works of art or invested in an art fund.
But it’s not just about having enough money to buy the painting in the first place. Any fund will charge management fees, and if you buy an expensive painting then doing the seemingly obvious thing of giving it pride of place on your wall could be a fast way to lose money.
Expensive works of art are often stored in protective boxes complete with detectors to monitor humidity and temperature levels, and to protect them from sun damage or other accidents such as a spilled cup of coffee.
And if you do put it on your wall then your insurance costs are likely to be high, warns Mr Connolly.
“If word gets out that you have expensive art hanging on your wall then you’re likely to be a target for burglars,” he says.
Art is also not a regulated investment so when things go wrong – for example, an artwork turns out to be a fraud – then investors are on their own and cannot fall back on regulation for any compensation.
“So what you get is an asset which is unregulated and illiquid, with potentially high costs, volatile performance and that produces no income. This isn’t exactly attractive to most investors,” says Mr Connolly.
Studies also suggest that the average return on art investments is rather less spectacular than those of the Leonardo painting owner.
A recent academic study, based on examining data from 1.2 million auction house sales of paintings, drawings and prints, concluded that art appreciated in value by a modest 3.97% per year, in real US dollar terms, between 1957 and 2007.
Of course given the current environment of low interest rates, that’s still a better return than many savings accounts will give you.
Deloitte art & finance co-ordinator Adriano Picinati di Torcello says paintings are also seen as attractive investments because it’s very clear what you’re buying.
Delotte’s recent report on the sector indicated that after a decrease in the global art market throughout 2016, auction sales recovered in the first six months of 2017.
Mr Picinati di Torcello says part of this is driven by investors’ desire for “real assets”. He says that because many investors lost money in the financial crisis by investing in products they did not understand, they are turning back to things such as art.
“Wealthy clients spend an increasing part of their wealth on art and collectibles,” he says.
Yet you don’t necessarily have to be super-wealthy to invest in art.
There are a growing number of art fairs and online marketplaces such as Artfinder aimed at buyers with a more modest budget.
The Affordable Art Fair (AAF), which started out in London’s Battersea Park in 1999, now holds fairs in more than 10 cities around the world. While prices can be as high as ВЈ6,000 for a single painting, the AAF’s average selling price in the UK is ВЈ600.
Founder Will Ramsay said the motivation behind the business was to prove that “you don’t need to be a squillionaire to buy art”.
But while it may be becoming more affordable, just don’t bet on becoming a squillionaire yourself.
Most art industry experts suggest that you buy a piece of art because you like it, not because you want to get rich.
“The most sensible approach is probably to buy something they like and can afford and, first and foremost, be prepared to keep it just for their own pleasure,” says Mr Connolly.
“If it goes up in value that should be just an added bonus.”
When you’re looking for investors in your music business, it’s important to remember that in exchange for the cash, you’ll be giving up a chunk of your business, some of your autonomy, or both. Make sure you carefully consider the real cost of the investment –not only what you will have to pay back, but what you will be sacrificing when you work with an investor–and make sure you are clear on these points in advance. Here are some of the options when it comes to raising money.
Angel Investors
Music business angel investors can take several different forms. Your angel might be a family member or friend with deep pockets, or they may be a complete stranger with loads of cash who are interested in investing in start-up companies. Some music business angels are people who have made their money in music and want to pass along their good fortune and their expertise. Others are merely people with money to spend who like the idea of getting involved in music. Angels will help with start-up cash, but your proposed business needs to be of a certain size to make it worth their time (see “Small Print” section below).
Venture Capitalists
Venture capitalists (VCs) will invest in businesses both at start-up and at times when the company needs a cash injection to grow. If you’re looking for VC funding, make sure you look for a group that has a history of investing in music-related businesses. Although VCs look for high-risk investments, they’re not always good matches with creative industries unless they’re used to that realm. In other words, if you can even get them to take you seriously, to begin with, then they don’t care about your “artistic integrity”; they want the loot, and they want it fast.
Arts Councils
Americans can all but forget about this one, but outside of the States, most countries have funding bodies that provide money for the arts, including the music industry. These arts funding groups can be great places to get the money you need because they are willing to work with music businesses of all sizes and have the ability to take chances on projects profit seekers like angels and VCs wouldn’t touch. Even better, most of the time they give grants rather than loans, so you don’t have to pay it back. You’ll still need a good business plan to work with them, however – though in most cases, they can help you write it.
Major Labels
For indie labels, investment by a major label is an option. This kind of investment will typically only after you’ve built a proven track record of success as a label and need money to expand. Start-up cash from a major is usually only given to someone who has either run a successful indie label in the past or has a good sales record as an artist.
Of course, funding from a major will require ceding some control of your label, which has not always ended well for indies.
Distributors
This is another one that is specific to labels, and it’s getting a bit harder to find. However, in some cases, you may be able to get a distributor to invest in a release on a project basis. For instance, if you have a chance to work with a prominent artist, but you can’t afford to come up with the advance or the money to give the album a proper push, your distributor might step in with an advance against future earnings on the album. They can also assist with a loan, that would make them an investor in the project giving them a more substantial cut of the album’s profits. Distributors might also help with manufacturing.
Important Things To Consider When Seeking Out an Investor
Does your investor want to be involved in making business decisions? If so, do they have experience in the music industry or another creative industry (and if yes, do you share a similar philosophy in terms of the business)? Working with an investor with tons of music industry experience who wants to help you shape and build your business can be a great thing.
Working with an investor who simply has a lot of money and wants to invest in your music related business because they think it would be kind of fun might not be such a great thing if they want some say-so in your business decisions. (Note that not all investors will want to become involved in your business. Some want to make an investment and wait for the payoff.)
Make sure you understand if you are getting an investment or a loan. Investments bring risk for the investor, and so they know they may lose their money. A loan needs to be paid back. If your investor is pressuring you to sign over a large share of your business, be cautious. If large amounts of money and large shares are involved, get legal advice.
Music Investors Generally Seek Bigger Investments
Another thing to remember when you’re seeking investment is that the hardest kind of business to find funding for is a tiny one. Generally speaking, VCs don’t want to talk to you unless you need at least several hundreds of thousands in investment. Music business angels will invest in smaller companies than that, but typically they’re looking for investment opportunities at least in the tens of thousands range. Raising a few thousand dollars is the hardest thing to do. In the absence of arts councils or generous family/friends, you may need to consider savings, personal loans, and credit cards if you need a relatively small amount of money to get going.
Also, be aware that music investment is usually given to businesses like labels, promotion companies, etc. Bands looking for investment will have a difficult time going through one of these routes and will need to look to labels, distributors and so on for their needs.
