Art

The Tangible Benefits of Investing in Art : Beginners Guide

The Affluent Ceo.

Jun 1, 2023 — 3 min read

Photo by Andrew Neel

Benefits of Investing in Art
A Beginner's Guide to Art Investment in 2023
Considerations: Art as an Asset and Alternative Investment

1. Benefits of Investing in Art

Growth: From 1993-2009, art markets saw a compounded annual market growth of 8%.
Accessibility: Approximately 80% of auction transactions are priced below €10,000, opening opportunities for many newcomers.
Tangible Passion: Unlike some other assets, you can display and appreciate art in your home, merging pleasure with investment.
Legacy: Art can be handed down through generations, serving as both an investment and a treasured heirloom.
Liquidity: Certain boutique firms allow owners to borrow against the value of their artworks, turning them into liquid assets.

2. A Beginner's Guide to Art Investment in 2023

Why Invest in Art?:

Art holds its value over time, independent of typical market fluctuations seen in stocks or other assets.
Merging Passion with Investment: It's more than just money; it's about personal interest and the joy of collecting.
Diversification: Adds a unique dimension to an investment portfolio, balancing risk.

Ways to invest in Art

You buy the art directly and own it entirely.
You invest in shares or fractional ownership of art pieces via private hedge funds such as The Fine Art Group or Artmundi.
Invest with online funds and platforms like aShareX, Masterworks, Particle or Yieldstreet that are shares or fractional ownership based.

Getting Started

Set Clear Objectives: Understand why you're investing: for profit, personal enjoyment, or both.
Do Your Research: Dive into the type of art that aligns with your passion and investment strategy.
Seek Professional Guidance: Trusted art dealers, gallery owners, or collectors can offer invaluable insights.
Budget Wisely: Know how much you're willing to invest.
Buying Platforms: Use reputable platforms and auction houses that you have researched and trust
Full Ownership or Fractional: Plan on whether you want to own art pieces entirely, buy shares of them through platforms or funds, or both.
Assessing Artists: Investing in emerging artists can yield higher returns (but comes with more risk) compared to established or mid-career artists.

Final Thoughts for Beginners:

Art not only has the potential for long-term returns but also brings prestige to your portfolio. The right approach and guidance can lead to fruitful and satisfying art investments.

3. Considerations: Art as an Asset and Alternative Investment

The Art Market Landscape

Traditionally viewed as high-risk, illiquid, and opaque.
New trends position art alongside traditional assets like bonds and real estate.
Growing due to globalization, increased wealth, and technological advancements.

Financial Perspective

The art market's estimated value stands over $3 trillion.
The financial sector is exploring art lending, advisories, and investment services.
Art indices have emerged to provide market transparency.
It's recommended to allocate only a small portion of total assets (5-10%) to art investments.

Alternative Investment Viewpoint

Art investments come with challenges: market inefficiency, valuation difficulties, and the emotional aspect of art.
Extra costs: Remember to factor in insurance, shipping, storage, and management fees.
Volatile Factors: The art market's health can be influenced by fashion, taste, and cultural shifts.

Conclusion

Art investment can diversify a portfolio and offer high returns, but it's crucial to understand the market's nuances. Expertise, research, and diversification are keys to navigating the complexities and reaping the benefits of art investment.

Sources

Giampiero Favato, Marc Day, Raya Mamarbachi (2020), Art as an Alternative Investment Asset . https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1112630