As with any kind of investment you consider, there are multiple aspects you need to think about first. We want to diversify our portfolio and have as much potential in it as we can get. However, jumping into an investment without any consideration could cost you greatly in the long run.
Art has turned into a popular alternative investment over the last few decades. Year after year, the art industry proves its resilience in the market, and the potential it has to be an excellent investment.
The Wall Street Journal called the art market the best investment of 2018 as it boasted a 10.6 percent return. During that same year, other investments, like the popular S&P 500 (which declined 5.1 percent), lost value.
As art investing gains traction around the world, companies are spotting this opportunity and taking advantage of it. Most recently, a company called MasterWorks has taken the art investment world and brought it to a more affordable level. This allows anyone around the world to take in the opportunity of investing in art.
If you’re considering trying your hand at art investments, you’ll want to consider the following five points.
Don’t Invest for the Sake of Investing
It’s hard not to get caught up in the hype when there is an obvious increase in not just the return of art investing, but in the popularity of it as well. Getting caught up in the hype can lead to irrational decisions and investing for the sake of investing.
Take the time to do the research on a particular piece of art and the artist behind it. What may seem like a good deal could ultimately turn into a disastrous investment.
Art is Subjective
It’s important to remember that art is subjective. Just because you find a certain piece interesting, that doesn’t mean other people will too. Art requires people to like in so that they’ll buy it. When you find a piece of artwork you think is worth investing in, either you’re right, and other investors appreciate the piece, or you’re the only one, and nothing ends up happening with it.
Again, research will help with a subjective investment. Spending time learning what the latest trends are in the art industry, who are up and coming artists, and what subjects are most popular in the art world will help you make a good decision for your portfolio.
Don’t Let Passion Cloud Your Judgement
Since art is subjective and personal, it’s easy to let your passion for a particular piece or artist cloud your judgement. When this happens, you could be left with a collection of art that either no one wants, or is worth a fraction of what you paid for.
Art is a Tangible Investment
Unlike stocks and bonds in the market, art is a non-correlated investment or a tangible investment. This means that it is something physical that is standalone from the stock market.
Typically, a correlated asset is one that moves with either another asset or the market. When the market goes down, so too does the value of that particular investment. By investing in a no-correlated asset, you’re adding something to your portfolio that won’t react to day-today news or a dip in the market. Art tends to appreciate at a steady pace, no matter what the market does.
Art is in Demand
There’s no question about it that art is in demand, and always has been. For as long as history goes back, art has been around. From carvings on the walls to the latest Leonardo da Vinci masterpiece selling for over $450 million, art is a popular asset.
The art industry doesn’t show any signs of slowing down anytime soon. A recent report expects the art industry to hit up to $2.7 trillion by 2026, making it an excellent investment opportunity to consider.