Promising form of diversification?

Stocks, bonds, cryptocurrencies, ETFs, and real estate. These are all common assets that many investors already have in their portfolios. However, as any investor worth the money knows, diversification is key when it comes to protecting oneself from a volatile economy.

Getting away from the stock market and entering auctions may seem like a smart idea. At first glance, it seems that the art market might be a very lucrative idea. The art market has been estimated at $65.1 billion in global sales (2021), which is certainly an impressive number.

However, investing in art is unlike any other type of investment you’ll ever make. There are many different factors to consider, and these can either make or destroy your art investment. You’ll want to consider all of the variables before you commit.

Why invest in art?

There are two main reasons why people become art investors: either they love a particular piece of art, or they want to make money from these alternative investments. If you fall into the latter category, this article is especially relevant for you.

While it is certainly possible for art investors to make money, you will need to take risks to do so. With similar stocks and assets, you can easily access the secondary market. This is simply not true with a piece of art.

When it comes to art, “beauty is in the eye of the beholder.” Simply put, if no one is willing to buy it, the sale price doesn’t matter! For this reason, investing in art that you have found at local art galleries is not the best strategy for making a profit on your long-term investment.

However, if you’re buying art you’ve found at an art gallery or from art galleries without expecting it to appreciate in value, that changes things. You still have the potential to make money on your investment, but if not, you have a nice piece of art to enjoy.

Benefits of investing in artwork

Art investments can provide an excellent return on investment, especially with physical artwork known as blue chip art. These individual pieces are from well known and recognized artists. However, their fame doesn’t stop there: even the art pieces themselves are well known!

Blue chip art is art that is expected to sell for an increasingly higher value with each sale. Some pieces – like Leonardo da Vinci’s Salvator Mundi – have graced auction houses with sales of over $450 million!

Most pieces of art will not sell for that much, but even so, excellent art is a smart investment. However, because these lots often sell for millions of dollars, they are not accessible to the average investor.

The risks of investing in art

While excellent art may be a relatively safe investment, most pieces of art are not reliable investments. This is especially true if the piece is from a lesser known or up-and-coming artist.

Owners often loan their art investments to art galleries for display. This gives the art pieces more exposure to the public and, hopefully, increases interest (and thus value). However, there is no guarantee that this tactic will work, and it is certainly not as predictable as the annual return on public investment.

If one does not choose to lend their art pieces to galleries, they will have to deal with storage and insurance costs. Physical artwork can be easily damaged, but any damage will immediately reduce the value of the investment. Theft is also a concern.

An alternative way to invest in art

As we have decided, excellent art is the most promising investment. Buying a multi-million dollar piece of art is impossible for most people, but there are ways they can invest in excellent artwork.

One such option is a service called MasterWorks. This unique service allows investors to buy fractional lots of artwork from famous artists. While they won’t own the physical artwork themselves, they can still benefit from a price estimate.

Purchasing art stocks is an ideal art investment method for those who want to move away from traditional investment assets but don’t want to be tasked with maintaining a physical piece of art.

The exact offerings you can invest in will vary (as will the applicable management fee), but almost anyone can invest in a valuable piece of art through MasterWorks.

Is investing in art worth it?

It certainly can be, but it totally depends on your specific goals. If you’re hoping to profit from a particular piece of art, then you’ll need to either buy a first-rate piece of art or invest in fractional shares.

On the other hand, if you are primarily interested in art from a visual appreciation standpoint, almost any piece you like will do. With luck, it will increase in value! If not, you’ll still have a piece of art to love.

If you are a high net worth investor with the capital available to purchase art outright, we highly recommend reaching out to the local art community before taking the next step.

However, if you don’t have millions of dollars to spend on a painting right now, you can still access art investment through MasterWorks. Click here to start buying fractional stocks from their huge artwork collection!

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