What is an art investor?

Investing in art is often confused with art collecting. An art investor acquires art primarily for the purpose reselling the work in the future for profit. An art investor may never sell the work, but that was not the original intention. An art collector acquires art for the enjoyment of its aesthetic or intellectual pleasure. The art collector may eventually sell a work, but that was not the original intention.

An art investor may also be confused with a dealer. Both the investor and the dealer intend to sell their acquired art, but the time frame for each is quite different. The art investor thinks in terms of years, even decades while the art dealer’s frame of reference is much shorter. The art dealer hopes to turn over his art in a very short time -- sometimes in days or weeks. The art investor normally purchases the art from some intermediary such as a dealer or an auction, whereas the art dealer normally deals directly with owners of art. Dealers usually generate most of their income from their art whereas an investor does not.

An art speculator purchases the art for much for the same reasons as the art investor. The fundamental difference is the kind of art each purchases. The investor purchases investment grade art, while the speculator purchases art that is anticipated to become investment grade art. Thus, speculators will be much more likely to purchase contemporary art as opposed to the investor, who seeks art from artists who have established reputations, usually historic reputations.

Investment grade art is always high-priced so art investors are always affluent. An art collector can purchase art for virtually any amount. Even people with very moderate incomes can be collectors. Dealers require capital to finance their inventory. Often, dealer’s inventories are funded by others, including art investors, who may be clients of the dealer. Depending on the art in which they deal, an art collector may be very affluent or not.

An art speculator requires some affluence, because even speculative art can be costly and since the goal is long term investment, no income will be generated in the short term.
It has been estimated that only one in fifty adults ever purchases an original piece of art. Perhaps, half of these people may be called “collectors.” Even though art collecting is an activity of relatively few people, American art collectors could be numbered in the thousands whereas the number of true art investors is probably in the hundreds. How many people can afford to buy a painting for a million dollars and put it in a vault for forty years?