Investing in Art: A Financial Investment You Need to Consider During Market Volatility

Written By
G. Dautovic
Updated
August 10,2022

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. And with major stock indices down by roughly 20%, now there’s never been a better time to consider adding art to your portfolio.

There are a few things to ponder before getting into fine art investing, and most importantly, you should do your research as with any asset. 

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. Compared to Bitcoin, which has dropped from $69,000 to $21,000 since November.

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 art one of the hottest markets on earth in 2021. 

Why Is Art a Good Investment? A Guide for Investors

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 art as an investment.

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. Having a low correlation 

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, like right now, the prices of contemporary art go up by 23% per year.   

It is a long-term investment

Investing in art 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 multimillion-dollar fine art is through online investment platforms like Masterworks. Masterworks art investing is the platform that 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 investing in paintings and other forms of art 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.

OVERVIEW

Masterworks is the perfect platform for those who want to invest in art but don’t have the time or knowledge to do it themselves. It launched in 2017 with the idea of making art investing more accessible to the average person. Today, the service has over 450,000 users who have invested over $500 million dollars with them. The company has since developed a great database of art and has a team of experts who carefully vet each piece before it is listed on the platform. It currently offers more than 100 paintings and artworks by some of the world’s most famous artists. This list includes names like Pablo Picasso, Basquiat, Banksy, and many more.

  • No investment minimums
  • Offers early liquidity
  • User-friendly platform
Learn More
On Official Website
Annual Fee:
1.5%
Profit fee:
20%
Minimum investment:
$0
Insurance:
Yes

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.

FAQ

Is art a good investment?

+

Yes, art is a good investment. It can add beauty to your home or office and increase in value over time. From 1995-2021, contemporary art outperformed the S&P 500 by 164%. In other words, contemporary art beat the index of the 500 largest publicly traded companies in the US. 

How can a beginner invest in art?

+

For a beginner, the best way to invest in art is through online investment platforms like Masterworks. This way, you can buy a share of fine art for an affordable price. Plus, their team hand picks all the best works for you. Simply put, you don;’t need any art background to invest well if you use Masterworks. 

How risky is investing in art?

+

Like with other investments, some risk is involved when investing in art. However, works by top tier artists like Picasso and Warhol, typically see less price volatility than stocks or crypto. 

How much should you invest in art?

+

If you’re looking to make this type of investment, it’s important to do your research so you know what you’re getting. There are many factors to consider when determining how much to invest: the artist’s reputation, the quality of the piece, and whether it’s a limited edition.

About author

I have always thought of myself as a writer, but I began my career as a data operator with a large fintech firm. This position proved invaluable for learning how banks and other financial institutions operate. Daily correspondence with banking experts gave me insight into the systems and policies that power the economy. When I got the chance to translate my experience into words, I gladly joined the smart, enthusiastic Fortunly team.

More from blog


Leave your comment

Your email address will not be published.


There are no comments yet