When it comes to non-conventional investment options, fine art is one of the best options. An investment in fine art Artwork may have the potential to yield an outstanding return on your investment dollars.
How? Let’s dive into art as an investment to understand how creativity meets financial profitability.
Art is intrinsically subjective. The value of art is not only based on the notoriety of the artist and the rarity of the work, but also on the buyer’s perception and market trends.
But the fine art market is hotter than ever and with a dose of research and a little instinct, many lovers of art are realizing above-par returns on their art investment dollars.
In fact, many investors are turning to fine art as a cornerstone of their portfolios. We’ll discuss more of the benefits of art investing in this blog, but here are the broad strokes:
What matters the most in the art marketplace are rarity and authenticity when investing in artwork.
The best place to buy and resell artwork is through art houses. These entities represent about 40% of all art sales in the U.S and they can draw much higher bidders than an online site.
Despite inflation, a pandemic, and geopolitical strife in Europe, the art market is booming. As of 2022, the market reached over $65 billion in sales, reflecting a 29% increase from 2020.
Even more remarkable is that these sales reflect numbers that are better than pre-pandemic levels in 2019.
The United States holds the largest market share (43%), with China and the UK holding second and third place with 20% and 17%. China had tied with the UK in 2021, so this shift illustrates how a rising Chinese middle and upper class are looking to buy more fine art in the future.
So, looking at Chinese artists may become increasingly wise in the coming years.
On the buyer’s side, just over half (53%) of high net-worth collectors (HNW) plan to purchase artwork next year. Of those surveyed, the vast majority (88%) planned to buy NFTs.
We’ve discussed NFTs and their impact on the market here. Although this percentage is slightly smaller than last year, it illustrates that there is still plenty of demand.
If you’re still unsure about investing in fine art, let’s break down its various advantages. Also, as with all investing, artwork should just be one piece of a much more extensive portfolio.
Artwork is not tied to the stock market. Over the last 25 years, the correlation between art and stocks was only -0.08. These two elements are not related.
This lack of correlation is attractive to investors who don’t want all their assets tied to the stock market allowing for more secure diversification of their portfolio.
The art market is largely unaffected by stock dips and downturns. Even when the equities and bond markets dip, the artwork isn’t affected much, if at all.
So, whether we’re in a bear or bull market doesn’t matter to buyers and sellers. That said it is harder to sell artwork during a recession, so investors need to plan accordingly.
As with other tangible assets, it’s best to sell during a boom, not a bust.
The S&P 500 generated an average 8% return over the last 25 years. By comparison, artwork generated a whopping 174% return over the same period. While that figure doesn’t represent all art, it shows some pieces’ earnings potential.
Buying fine art doesn’t mean you’ll double your investment, but you can likely do better than the stock market, especially if you’re strategic with your money.
Although NFTs have disrupted the art market, most pieces are physical assets like paintings, lithographs, etc. So, rather than looking at numbers rise and fall on a spread sheet, you have an actual item with an intrinsic value.
While the artwork isn’t as objectively valuable as something like gold or real estate, it will hold immense value to the right buyer.
In this industry, you can’t just “play the numbers” and expect the best. Instead, there is a bit more finesse involved, which is why it’s always good to work with professional art houses.
NFTs have become increasingly visible in the art market but can also be pretty volatile. Because NFTs aren’t a physical asset, they’re not as stable as traditional artwork.
So, both buyers and sellers have exposure to pump-and-dump schemes. However, since an NFT is non-fungible (can’t be reproduced), they do have intrinsic value. As we mentioned, many buyers are looking to invest in NFTs in the future, most likely once this sector bounces back.
The COVID-19 pandemic triggered one of the most significant dips the art market has ever seen, particularly because auction houses couldn’t host buyers and sellers in the same room anymore.
Fortunately, technology came to the rescue, and many of these businesses moved online. Once that happened, artwork bounced back almost immediately, with solid sales in the second half of 2020 that continue to this day.
But why is the market booming when everything else is starting to shrink? Right now, it seems like many investors are shoring up their portfolios by buying art as a long-term investment strategy.
HNWs are still willing to purchase high-end pieces with the idea of reselling them later during another boom period. Now is the perfect time to flex your investor’s muscles and put money into art.
You can either buy pieces outright or work with companies that offer crowd-sourced art investment. In the latter case, you put up as much as you can afford, then you’re a part-owner of one or more pieces.
Then, the art-house sells the work and shares the profits between investors.
Fortunately, there are quite a few types of art you can buy, such as:
This term refers to the artwork of modern artists who are actively creating. So, these pieces can exist in different mediums, such as sculpture, painting, or wood prints.
Contemporary art can be somewhat inconsistent because it relies on current trends. Also, you need to be able to pick an artist who will become notable in the future.
Just in May 2019 Jeff Koons Rabbit was auctioned for an unbelievable $91.1 million.
A lithograph is a print of a drawing. The technique was invented in 1796 and is widely used by artists who choose to draw instead of paint.
When looking at lithographs, it’s imperative to focus on original pieces or early copies of a specific edition.
For example, an artist may do a limited run of 30 prints and that will be the limitation of this particular fine art multiple, typically signed and numbered by the artist.
Screen printing is a method of producing limited and often rare multiples of important works of art.
So, like other fine art multiple mediums, Screenprints are often replicated in limited quantities by the artist, signed, and numbered.
If you can buy an original screenprint, you are frequently buying an appreciable investment work of art.
When you think of investment quality fine art, a rare original work of art is still the peak of the art-world investment pyramid.
The value of these works can vary based on the demand of that artist’s work, the condition, provenance, medium, historic auction prices realized and a number of other factors.
Artwork can be a very wise investment if you understand the marketplace, have a keen eye for investment-grade works, and know what you’re doing.
Make the most of your investment with the experts at Dane Fine Art. Contact us today to buy and sell any fine art.
Showroom
2320 Haverford Road
Ardmore PA 19003
Showroom
2320 Haverford Road
Ardmore PA 19003
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