Art is widely recognized as an alternative asset class, due to its lower correlation with traditional stocks and being seen as an effective way of diversifying an investment portfolio.
Art investments can be challenging: they require extensive expertise and have high transaction costs. Furthermore, the pieces you own need to appreciate in value in the coming years for optimal returns.
As with investing in any sector, art can be a volatile venture. To increase stability and return potential, investing in works by well-known artists may offer some stability – according to Artprice Global Index’s research, artwork by certain artists has appreciated significantly faster than the S&P 500 in recent years.
Blue-chip art refers to works by established artists that have proven their worth through high auction sales and steady appreciation over time. While this market can be competitive, understanding its historical context and characteristics is vital in order to navigate it successfully.
Investment in blue-chip art can be an attractive strategy for those with access to professional art brokers, yet becoming increasingly accessible thanks to new online platforms that enable investors to purchase shares in pieces of artwork from famous artists like Banksy and KAWS. Masterworks and Public are two such digital platforms offering this investment option that offer the chance for users to become part-owners of unique works created by these artists and many more.
Art is an excellent way to diversify an investment portfolio. Art returns tend to be independent from more traditional investments like stocks and bonds, providing protection from market fluctuations.
Blue-chip art may have a high entry point, but savvy investors can still purchase works by emerging artists with promising potential at much more reasonable prices than works from established artists – providing collectors with access to fresh talent.
Investment in works by emerging artists can be risky, since many may never reach the fame of Jeff Koons or David Hockney. Therefore, collectors should have an in-depth knowledge of each artist’s background before seeking advice from art professionals.
An experienced art expert can identify emerging artists and assist collectors with setting prices that reflect the actual worth of each work of art.
Today’s society is immersed in technology: kids learn through online educational platforms, professionals telecommute remotely, and people document major life moments on social media. Artists too take advantage of technological advancements when creating art: with instantaneous access to references, tutorials and tools at their disposal they are now creating more impressive works on a budget than ever before.
This shift has created more opportunities for buyers to purchase digital art. Alongside established auction houses, there are now also online galleries and art websites that offer art that can be stored and displayed on computers, phones or tablets.
Digitalization has made art more accessible to investors seeking an alternative asset class with potentially steady returns. Indeed, during times of economic instability art has outshone other assets classes and served as an effective hedge against stock market volatility and currency devaluation. Furthermore, investment platforms that offer carefully selected opportunities with low minimum buy-in minimums have contributed greatly to broader accessibility.
Fractional ownership of art may be relatively new, yet it has already revolutionised the market for high-end works. Instead of purchasing the whole artwork outright, investors can own part (e.g. 20%) and receive monthly returns proportionate to their shares.
Fractionalisation provides for much lower investment minimums and makes art investing more accessible for everyday investors. Furthermore, fractionalising a work can remove some of the barriers associated with owning high-value art pieces such as storage costs, insurance premiums and maintenance requirements.
Masterworks is one of the leaders in this space, providing investors with fractional ownership of artworks through SEC-regulated fractional ownership on its platform. Since 2015, it has amassed assets worth $882 million that it purchases regularly before dispersing payouts to shareholders on an ongoing basis. Furthermore, investors may sell shares prior to resale in order to gain liquidity and create additional flexibility.