By Kat Tretina
Reviewed by Rachel McVearry
Aug. 25, 2022
Photo / Image Source: Unsplash
Whether you're a fan of Banksy's street art style or prefer the vivid colors of impressionists like Monet, there's no doubt that art can be a great investment, and it's growing in popularity. According to the 2022 Global Art Market Report from Art Basel and USB, the global art market reached $65.1 billion in aggregate sales in 2021, up 29% from 2020.
As a tangible asset, art can be a good hedge against inflation. Art value isn't tied to the stock market's performance, so artwork can provide diversification and stability during times of volatility.
While buying art for your kitchen or living area can be a great way to add color and personality to a room, there's more to investing in artwork than just purchasing individual pieces.
If you're wondering how to invest in art, here's what you need to know about investing in this alternative asset class:
Role of Art Investments in a Portfolio
Art plays several roles within an investor's portfolio. Diversification is key when it comes to investing, and adding art can help you achieve that goal. Art is a unique asset class with a low correlation to stocks, bonds and other traditional investments. When stock prices dip, art tends to hold its value.
For investors looking to preserve their wealth during a volatile economy, art can also act as a hedge against inflation. Because it's a tangible asset, art can perform well during periods of high inflation, and it's not as susceptible to market fluctuations.
Downside of Investing in Art However, there are some drawbacks to investing in art. One of the main negatives is the lack of liquidity. If you need to access cash or liquidate your investment of physical artwork, you'll need to sell it through an art gallery, auction house or private art collector. It can be a time-consuming process to sell a valuable piece of art, so art tends to work best as a long-term investment.
Counterfeit pieces are also a common challenge art investors face, especially those that are new to the art market. It can be difficult to tell a fake from an original, so working with a reputable gallery, art dealer or artists is essential. Learn about our Certificates of Authenticity.
Finally, because many art investments deal with physical works of art, you also have to worry about properly storing and protecting your investment. And there may be additional costs involved to store and insure your artwork. Ways to Invest in Art Investing in art can be a useful alternative to traditional stocks and bonds, though it has a reputation for being out of reach for all except high-net-worth individuals. But the art game is changing. Modern investing platforms and digital art allow people at every income level to become art investors.
There are key ways to invest in art: Individual works. If you want to invest in artwork you can hang in your own home, you can purchase art by working with directly with an artist, a dealer, using an auction house or attending art fairs.
Art is a massive market with a range of styles and tastes. It's important to research and understand the leading artists, their markets and their growth potential. And don't underestimate the importance of finding something that speaks to you, because it may have that appeal to other buyers, too.
In general, you want to look for artwork that has been traded multiple times to see what the piece's growth rate is. Even if you intend to hold on to the artwork for years, researching past performance and similar pieces from the artist can help you gauge the expected return on investment.
Takeaway
After you've researched how to invest in art, you can move forward with investing your money. When evaluating whether to buy a piece of artwork, whether physical or digital, consider the level of demand from art collectors for the artist's work. Evaluating whether pieces from artists are in demand is the key to maximizing the odds that the pieces will appreciate in value.
Updated on Aug. 25, 2022: This story was published at an earlier date and has been updated with new information.
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