The Fine Art of Investing - Challenges

Continuing McCarthy's discussion, "numerous factors play a role in valuing art - scarcity, recognizability, and provenance, among others - and a casual collector is highly unlikely to have sufficient reliable information to determine a fair value. Combine the valuation difficulties with market illiquidity, lack of dealer transparency, and the risk of owning an asset whose appeal is subject to fads, and the challenge increases. Buying and selling art is also costly. Investors must factor in marketing and insurance fees as well as shipping and storage costs, for example. Recouping transaction costs requires significant appreciation.

A casual art collector should consult with an expert, but make sure the consultant works independently for you, and doesn't receive any commission from art dealers to whom the consultant refers."

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