For art traders, buying and selling art has been a more lucrative way of making money than other investments. In fact, many have built a growing and rewarding business.
The first thing that anyone who is interested in buying art needs to decide is which role they want to play; dealer, investor, or collector. Each has its own motivation, trading strategy, and overall objective. The dealer buys what he believes will fetch the highest price in the short-term, the investor what he feels is the right painting at the right time, and the collector, simply what he likes. When it comes to buying, each of these roles comes with its own strict criteria.
The dealer involves himself in buying and selling paintings, as well as in brokering transactions. Like other business owners, he is talking with customers and suppliers on the telephone every day, be it with other dealers, auction rooms, galleries, collectors, or investors. Dealing has increased in popularity, following other home business trends, such as online auction sales and drop shipping. Others prefer a business model that allows them to trade from home without having to carry stock, such as spread betting. With spread betting, you can gain leverage by benefitting from comparatively small price movement, and gear your portfolio for greater exposure or make your capital go further. While not altogether the same, there are some similarities to that of the art dealer.
The investor has a specific outcome in mind when he makes a purchase. He buys strategically, according to his financial plan and strict criteria, conducting extensive research in a bid to minimise risk. His timeframe is typically between five and seven years out. An economy that is performing poorly will recover within this time. Even a painting no longer considered fresh, such as one that has been unsuccessfully shopped around or recently sold at a public auction, will be considered fresh again. He buys what he believes collectors will love, in order to give him a quick sale. He expects a 25 percent return on investment (ROI) but is confident that he can make an even higher return.
The collector has a passion for art, but buys it at his own leisure, without any strategy to speak of or any consideration for what kind of painting is trending. He buys whatever pleases him at the time, and may only buy once a year. He has no financial objective or exit strategy to speak of. He may even keep a painting his entire life, ultimately leaving it to a museum or his children. Serious collectors typically have a narrow focus on a particular kind of art and become experts in their chosen speciality.
If you come across a painting that you like, and its condition is good to excellent; it’s fairly priced, within your price range, and you’ve done your homework, then buy it. You can simply enjoy it for its aesthetic qualities, or benefit from its profit appreciation for as long as you wish.