What is the Best Art to Invest In?

The common man may not consider art when choosing investments. Markets present nuances which outsiders in the art world may find hard to grasp. Despite the apparent obscurity, detailed research can reveal tremendous opportunities for buyers of art. But what is the best art to invest in?

Why Invest in Art?

First, you may wonder why anyone might consider art as an investment, to begin with. This is because, unlike traditional stock market investments, pieces of artwork have historically maintained or increased in value despite economic downturns. This makes them a lucrative investment for some and a good option to diversifying your portfolio

Unsurprisingly, the works of the greatest artists are usually higher than the works of other artists. Studies reveal that the most important periods of the careers of great artists contribute to the value of their works. 

While this answers the question of what best art to invest in, it also presents several questions. Those interested in making investments in art should consider what art scholars and critics define as a great artist. Thorough research of the history of art can widen one’s understanding of different artists and potential returns on their investments. 

Price Trends in the Markets

While the price of pieces of art may seem irrational, there are patterns which when recognized can prove to be invaluable in determining the most viable investment opportunities in the market segment. Art experts reveal several clues that lead to the most important artists. 

The auction prices of artworks in the career of an artist, for instance, can be used to determine whether their work is worth investing in. Age-price profiles of artists can be developed using historical data on their artwork. Between 1950 and 2000, the rate of return of American paintings was 12.2 percent, which was only 0.4 lower than the return of the S&P 500. 

By 2018, the average return on artwork sat around 10.6 percent. However, investors should keep in mind you’ll need to invest at least five figures to see any real return and making money on art isn’t guaranteed. 

Those interested in purchasing art are encouraged to exercise patience when deciding on the best time to sell their art. Many would be surprised at the fact that even when the returns from artworks are lower than the returns from stocks, yields (in many cases) are not significantly different. 

Taxes and Price Resistance

Owners and prospective buyers of art can become strongly attached to works. This is due, in part, to the sense of superiority that one may feel being an owner of extremely rare works. The value of stocks is derived from several factors including buyers’ expectations of future prices. 

The value of art, however, is derived from unique factors that also include expectations of future prices. A purchaser of art may choose to buy a work for enjoyment, reduction of taxes, and also for gaining profits from a sale. For this reason, buyers of art are encouraged to not only consider price history and expectations of future prices as the main factors for determining the price. 

An increasing number of experts believe that art should be in every investor’s portfolio. The World Street Journal suggests that almost 8 percent of the total wealth is in passion investments such as art. In 2005, $630 million dollars was invested in the market for paintings sold at auction for $5 million and above. Art has exhibited strong resistance in the past against the forces of financial downturns. Despite the financial crash of 2008, there were record exchanges being made in the art sector as masterpieces being exchanged at auctions increased to $2.2 billion.

This is why platforms such as Masterworks have been growing in popularity in recent years. They give you options as to where you’d like to invest your money, in which artists, and on which pieces with less risk instead of making the purchase outright yourself.

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Posted in: Personal Finance

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