Perhaps you’ve invested in stocks and bonds, and now wish to diversify your portfolio. You’ve noticed that more and more people are putting their money in art, particularly in the digital space. But you’re concerned about risks and other perceived barriers to buying art, including how much it costs to enter the market. So, in the end, is art a good investment? Well, let us look.
What Kind of Wealth Do I Need to Invest in Art?
Surely, you’ve heard reports of fine art pieces going for hundreds of millions of dollars. The fact is that those are the transactions that grab headlines. But according to Citi, pieces valued at under $50,000 offer the best performing price point, both return- and risk-wise. So, don’t let a relatively small purse dissuade you from entering the art market.
How Does Art Fare Against Bonds?
Very well. In fact, while the art market is more volatile than bonds, between 1985 and 2018, returns on contemporary art averaged 7.5%, while the art market overall averaged 5.3%. At the same time, investment-grade bonds from developed nations had average returns of 6.5%, while global high-yield bonds returned an average of 8.1%.
Is Art a Good Way to Diversify?
Art is increasingly popular as an investment for that reason. Why? Largely because art’s performance isn’t linked to the ups and downs of the stock market. In 2018 the art market reached $67 billion globally, according to UBS, the second-highest amount on record.
Has Technology Helped or Hurt the Art Market?
Technology has certainly helped art investment. One longtime issue for the market has been transparency in pricing. But owing to technological upand comers such as blockchain, such impediments are being steadily diminished. Not only do such digital technologies speed up authenticity establishments and the performance of valuations, but they allow for share-based investment in individual pieces as well as collections. Such efficiency could also help drive down prices.
But Aren’t There Risks?
Of course. Every venture has risks. In art, there’s volatility around annual returns, and the performance of disparate artists and collections can vary widely. There’s also a liquidity issue; you usually can’t unload an artwork right away. What’s more, there’s no established way to track a product’s performance. But everything is relative and despite such risks, the art market remains increasingly popular – for good reasons.
Where Can I Make the Most Money from My Investment?
Your best bet may be fine art auction houses, which usually will bill you between 5% and 25% of what you charge for auctioning your artwork.
How Do I Know if I Have a Good Deal?
Well, there’s no getting around research. You must put in the time. If you have a favorite artist, find out what their works have brought over time. This will give you good insight into how much you can expect to profit over the long haul. Note that you can either buy a work outright or purchase shares through an online marketplace.
As with any other investment, there’s a certain level of risk where art investment is concerned. But the rising popularity of such investment is understandable, given the benefits, which include protection against inflation, solid long-term returns, and an independence of the stock market.
If you’re new to art investing or want to get started, we suggest you check out the platform Yieldstreet, which offers access to alternative investments – other than stocks and bonds – heretofore reserved for institutions and the uber wealthy. Those investment opportunities include works of art, which Yieldstreet experts vet before putting them on offer.