How to invest in art | Invest
Whether you’re a fan of Banksy’s street art style or prefer the bright colors of Impressionists like Monet, there’s no doubt that art can be a great investment, and its popularity continues to grow. According to Art Basel and USB’s Global Art Market Report 2022, the global art market reached $65.1 billion in total sales in 2021, up 29% from to 2020.
As a tangible asset, art can be a good hedge against inflation. The value of art is not tied to stock market performance, so works of art can provide diversification and stability in times of volatility.
While buying art for your kitchen or living room can be a great way to add color and personality to a room, investing in art isn’t just about buying individual parts.
More dealers and art houses are engaging in dual online and in-person selling, Art Basel reports, as a “seismic shift” in the art world towards digital objects has also taken place. product. New platforms and the demand for non-fungible tokens, or NFTs, are making investing in art more accessible, so you can invest even if you’re not among the wealthiest.
If you’re wondering how to invest in art, here’s what you need to know to invest in this alternative asset class:
- Role of artistic investments in a portfolio.
- Disadvantage of investing in art.
- Ways to invest in art.
Role of artistic investments in a portfolio
Art plays several roles within an investor’s portfolio. Diversification is key when it comes to investing, and adding artwork can help you achieve this goal. Art is a unique asset class with a low correlation to stocks, bonds and other traditional investments. When stock prices fall, art tends to retain its value.
For investors looking to preserve their wealth in a volatile economy, art can also act as a hedge against inflation. Because it is a tangible asset, art can perform well during periods of high inflation and it is not as sensitive to market fluctuations.
While the rise of digital art and NFTs is a relatively new development, the market for physical art is more established. Unlike stocks, which are more sensitive to market changes, the demand for art has steadily increased and physical works of art tend to maintain or increase in value over time.
Disadvantages of investing in art
However, there are a few downsides to investing in art. One of the main negative points is the lack of liquidity. If you need access to cash or liquidate your investment in a physical work of art, you will need to sell it through an art gallery, auction house, or of a private art collector. Selling a valuable piece of art can take time, which is why art tends to work best as a long-term investment.
Counterfeit pieces are also a common challenge faced by art investors, especially those new to the art market. It can be difficult to tell a fake from an original, so it’s essential to work with a reputable gallery or art dealer.
Finally, since many art investments involve physical works of art, you also need to be mindful of properly storing and protecting your investment. And there may be additional costs to store and insure your artwork.
Ways to invest in art
Investing in art can be a useful alternative to traditional stocks and bonds, although it has a reputation for being beyond the reach of all but the wealthy. But the art game is changing. Modern investment platforms and digital art allow people of all income levels to become investors in art.
There are five ways to invest in art:
Individual works. If you want to invest in art that you can hang in your home, you can buy art by working with a dealer, using an auction house, or attending art fairs.
Art is a huge market with a range of styles and tastes. It is important to research and understand the main artists, their markets and their growth potential. And don’t underestimate the importance of finding something that speaks to you, as it can also attract other buyers.
Typically, you want to look for artwork that has been traded multiple times to see what the room’s growth rate is. Even if you intend to keep the artwork for years, researching past performances and similar pieces by the artist can help you gauge the expected return on investment.
Artistic funds. Although you won’t find art index funds or exchange-traded funds on traditional investment platforms, companies that offer art-specific funds are becoming increasingly popular. With platforms like YieldStreet, you can invest in top-notch art. Similar to blue chip stocks, blue chip art is a term that refers to the works of master artists with ever-increasing values as well as the art of mid-career artists . YieldStreet acts as a robo-advisor, and it manages and insures your investment. According to YieldStreet, his fund has an annualized net return of 12.2%.
Fractional shares. Works of art by top artists can cost thousands of dollars, or even millions. If you don’t have that kind of money to invest in art, there is another way to access this alternative asset class: fractional shares.
Platforms like Maecenas and Masterworks allow you to buy fractional shares or slices of valuable artwork. Investors can open an account with as little as $1,000. Fractional shares allow you to buy a portion of many different works of art, diversifying your portfolio.
Digital art. The digital art market is exploding in popularity, especially with NFTs. In 2019, NFT sales on blockchain platforms such as Ethereum, Flow, and Ronin totaled just $4.6 million. In 2021, sales reached a staggering $11.1 billion, reports Art Basel.
NFTs are non-physical digital forms of traceable and verifiable works of art. What sets NFTs apart from other digital art forms is that they have “digital integrity”, or one-of-a-kind identifying coding and metadata, so they cannot be replaced. .
NFTs are supported by a blockchain network, providing transparency, authenticity, and liquidity. It also allows NFT investors to easily buy and sell artwork to other investors.
There are NFTs from masters such as Leonardo da Vinci and Vincent van Gogh. But NFTs are also a great way to buy works by emerging artists. For example, Mike Winkelmann, a digital artist who goes by the name Beeple, sold a digital collage titled “Everydays: The First 5000 Days” at Christie’s auction house in March 2021 for a record $69.3 million. .
- Visit an NFT market. Through NFT marketplaces, you can buy art NFTs from artists or other investors. OpenSea is one of the largest and best-known NFT marketplaces. According to the company, it has managed over $20 billion in market volume.
- Fund your digital wallet. NFT platforms require you to create a digital wallet and add currencies before you can start buying and selling tokens. Generally, you cannot use fiat currencies like the US dollar; NFT platforms require cryptocurrencies such as Ether (ETH), Solana (SOL), USD Coin (USDC) or Dai (DAI).
- Select your favorite artwork and make an offer. Once your account is created and you have funded your digital wallet, you can browse the marketplace platform and buy the product you want.
Related Actions. As the popularity of NFTs and other digital art forms increases, another way to invest in art is to invest in supporting stocks. Quality NFT artists use design software to create their artwork, such as Adobe Illustrator or Photoshop. By investing in stocks such as Adobe Inc. (ticker: ADBE), you can benefit from the popularity of NFTs without the need to use cryptocurrency or blockchain technology.
After studying how to invest in art, you can continue to invest your money. When evaluating whether to purchase a work of art, whether physical or digital, consider the level of demand from art collectors for the artist’s work. Assessing whether artists’ pieces are in demand is key to maximizing the chances that pieces will appreciate in value.