How to Invest in Art: A Quick Guide on Fine Art Investing

When it comes to making financial investments, there are a variety of options to choose from. You can invest in stocks, bonds, real estate, and more. However, one option that is often overlooked is investing in art. Many people don't think of art as an investment, but they should. 

Recently, top investment firms like Citi, Morgan Stanley and Goldman Sachs classified art as a financial asset. There are many reasons why investing in art can be a financially sound decision. First and foremost, the value of art tends to significantly appreciate over time.

In fact, according to new data, art has outperformed the S&P 500 by nearly three-fold in the last 25 years.

Fine Art, Fine Investment

Even if you aren’t into art, you might have heard that the world’s most expensive painting, da Vinci’s “Salvator Mundi,” was sold for a record $450.3 million in 2017. To put that into perspective, that’s more valuable than Bruce “The Boss” Springsteen's entire music catalog.

More importantly, the cultural significance of artists like da Vinci is unlikely to decline, making high-end art a relatively stable investment.

Investing in artwork doesn’t only mean supporting traditional artists. Street art has gained enormous popularity in the last few decades, too. For example, Banksy’s famous piece “Love is in the Bin” was sold at Sotheby’s for $25.4 million in 2018, 18 times more than the original estimate.

It all depends on the strength of the artist market and historical track record.

The fine art market has boomed in the last few years, causing the Wall Street Journal to call it one of the hottest markets on earth. 

Why Art Is a Good Investment

When it comes to financial investments, art may not be the first thing that comes to mind. However, investing in art can be a wise decision, especially during periods of market volatility. 

Here are some reasons why you should consider it.

It Is a Physical Asset

Art is a tangible asset that can hold its value over time. Unlike stocks or other investments that can be affected by changes in the market, art is a physical object. Stocks or other investments that can be lost if the company goes bankrupt, but art will always have value, which is why many experts believe art is a safe investment. 

It Is a Unique Investment

When you invest in art, you are not investing in something that everyone else is investing in. Instead, you are investing in something that is unique and has the potential to gain value over time.

Because of its specific drivers, art as an asset class has a near 0 correlation to equities, according to Citi. That’s the lowest among any major asset class.

It Can Serve as an Inflation Hedge

Another reason to invest is that art can serve as an inflation hedge. The rise happens because the price of art is not directly tied to the performance of other asset classes. During times of high inflation, the prices of contemporary art go up by 23% per year.   

It Is a Long-Term Investment

Unlike stocks, which can be sold quickly, art takes time to appreciate in value. This makes it a good investment even during periods of market volatility and stock price diving.

It is also a smart way to diversify your investment portfolio. With this type of investment, you are not putting all of your eggs in one basket. This diversification can help protect your wealth during long periods of market volatility.

If you’re looking for diversification and a quality inflation hedge, then art could potentially be the perfect investment for you. 

Is Art Investing for Everyone?

Although the art market can be volatile, art investment is still one of the best ways to diversify your portfolio. Aside from having an eye for detail to recognize valuable art, you need to be able to afford it.

One of the best ways to invest in fine art is through online investment platforms like Masterworks, which makes investing in blue-chip art easy and accessible for everyone. It is a cost-effective way to invest and has a low barrier to entry.

The best thing about it is that you don’t need to buy a masterpiece to be able to invest in it. The platform itself buys the world’s famous artworks so that you can buy shares of paintings by world-renowned artists like Pablo Picasso, Banksy, and George Condo. And because you’re only buying shares, you can sell your investment anytime.

The Bottom Line 

Like any investment, art carries some risk, but buying and selling artwork can pay off handsomely if you make the right choices.

As it is a sensitive topic, you should do your homework and consult an expert to find the right piece of art to invest in. With a little bit of research, you can find an artwork that has the potential to increase in value and make you a lot of money.

So, if you're looking for an investment that is both fun and has the potential to make you money, investing in art is a great option. With market volatility being what it is, now is a great time to start building your collection.