Investors considering long-term investment opportunities like stocks, mutual funds, bonds and real estate might want to look into an outside-the-box option that’s growing in popularity: original artwork.
High-end artwork has gained momentum as a long-term asset in the investment marketplace over the last few years. After a fair but unremarkable performance in 2023, experts believe original art will be a solid investment option in 2024. Legendary auction house Sotheby’s has even taken the unusual step of disclosing its complete 2024 auction schedule in advance.
Is collecting fine artwork a prospect for your investment goals? Learn more in this guide.
Why Invest in Art?
Original artwork may not be the first idea that springs to mind when you’re considering investment opportunities. Historically, however, artwork has been a fairly reliable nonliquid investment option with a surprising potential for capital appreciation.
Art remains a solid choice as a long-term investment. It’s fairly recession-proof, and its value stability can reinforce the financial foundation of a portfolio. Its prospects for increased worth make it a potentially viable commodity even in economic downturns.
How to Invest in Artwork
What does it take to get started in artwork investment? Here are a few steps you can take to break into the business.
Research
As with any commodity you’re considering investing in, researching and gathering intel are the first steps to take. The best entry points are art galleries and auction houses. In these establishments, you can see the work in person and get a sense of current trends and market value.
Art fairs, showings and exhibitions also display a wide range of artworks, often presented by the artists themselves. These events provide networking opportunities. Connecting with artists and the studios they work with is a great way to learn about the business from all angles, creatively and financially.
Work With an Expert
The art world is as complex as any investment landscape. It’s worth the effort to contact art advisory firms, gallery managers, auctioneers and consultants to get advanced information on art investing. An art expert can give you advice on the overall marketplace, building and diversifying your art collection and even negotiation tactics.
Find an Online Platform
Several online spaces are devoted to art investors, giving them a digital space to make transactions. Artsy, Masterworks, Saatchi Art and Artnet are just a few of the most popular sites for art investing. They make diverse artwork accessible to more investors by streamlining the acquisition process.
Decide on Your Budget
Deciding on and sticking to a budget is crucial to successful art investing. It imposes disciplined trading measures and helps to restrict or limit risk or over-commitment.
A budget is especially important when you’re dealing with traditionally nonliquid investments like art so they can coexist with the more liquid investments in your portfolio. Take normal costs like storage, insurance, maintenance and transactional fees into consideration.
Create an Investing Strategy
Because the art world is more fluid and varied than other investment possibilities, it’s a good idea to take more time to craft your investment strategy. Some common approaches to consider may include:
- Diversifying across different styles and mediums
- Considering risk tolerance, budget and overall investment goals
- Focusing on established, working artists
- Working with mutual or private art funds
- Supporting new and emerging artists and communities
- Finding work of great historical significance
- Making regular valuations and monitoring the market
- Participating in auctions, in person or online
Having a smart game plan before making commitments is a prudent step in any endeavor, especially art investments.
Make Educated Decisions
To recap, the first steps of art investment are:
- Surveying all your options
- Researching the marketplace
- Familiarizing yourself with the art scene and the artists within it
- Setting a reasonable budget and expectations
Once those tasks are completed, you should be able to make informed decisions about how to navigate the art market. The more experience and exposure you have to the art world, the more assured you’ll be about making the right choices.
Benefits of Investing in Art
Investing in art can result in unique benefits and advantages, including the following.
Potential ROI
It’s not guaranteed that artwork will appreciate over time. However, the potential for sizable returns on your investment (ROI) is real. Market trends, artist reputation and relative rarity can drive up the value of a given piece of art.
Portfolio Diversification
Diversification of holdings and investments across types and sectors is one way investors mitigate the risk of economic downturns. Artwork gives your portfolio another dimension, broadening your holdings and stretching your capital.
Cultural Relevance
Owning acclaimed, valuable art comes with a certain prestige. No other investment carries the possibility of connections to the art world and its vibrant social ties.
Tangible Assets
Unlike stocks, bonds, mutual funds and retirement plans, artwork is something you can see, experience and keep. It adds a sense of enrichment and intrinsic value.
Platform Accessibility
Artwork is becoming more accessible as a nontraditional asset thanks to online sites like Yieldstreet. The digital art marketplace also offers the possibility for lower investment thresholds and fractional ownership, attracting a broader range of investor classes.
Considerations Before Investing in Art
Before jumping into art investing, consider a few factors and steps to prepare.
Costs
Auction fees, insurance premiums, restoration costs and commissions can all apply. With art’s relative illiquidity and lack of revenue, it’s important to consider cost factors before investing.
Financial Goals and Risk Tolerance
As with any investment, know your overall investment goals and ability to weather risk and market volatility. An investment in art is likely a long-term proposition, so keep the distant future in mind.
Authentication
Forgery and counterfeits are prevalent in artistic circles. Try to get verification of an artwork’s authenticity through appraisals, provenance documentation and certifications.
Upkeep and Storage
Know where and how you’ll store your art if you plan on housing it yourself. You’ll need to pay to manage climate, insurance, security and possibly restoration.
Types of Art to Invest In
The art world is rich in history, significance and diversity. You’ll have several options and approaches when you decide to invest. Here are some common areas for art investors to focus on.
Works of Old Masters
It’s technically possible to invest in Old Masters like Leonardo da Vinci, Michelangelo, Masaccio and Sandro Botticelli. Nonetheless, doing so is extraordinarily difficult and expensive.
Only art dealers, galleries, high-end auction houses and private collectors have access to these masters’ work, and they seldom appear in the public marketplace. Verifying these works’ authenticity is also a far more detailed and costly process.
Consider taking a “school” approach and focusing on investing in notable movements and periods like the Italian Renaissance and the Dutch or Spanish golden ages. You may find valuable items from lesser-known artists who were contemporaries of the old masters.
Blue Chip Pieces
Blue chip artworks are extremely valuable, in-demand investments produced by known artists with strong track records. These include some of the Old Masters’ works but also more contemporary figures like Pablo Picasso, Andy Warhol, Roy Lichtenstein and Jean-Michel Basquiat.
Blue chip art investing comes with a higher-priced entry point, too. Typically, the artworks dependably appreciate over time and stand little risk of losing value, even during market fluctuations.
Up-and-Coming Artists
Possibly the most satisfying aspect of investing in art is supporting emerging artists and growing communities. Although there’s more risk involved with unknown talents, they tend to attract more passionate and involved investors interested in the future of the art form — it’s a very personal matter.
Find emerging talents by patronizing local art fairs and exhibitions, especially citywide art walks, auctions, benefit events and local galleries. Keep up to date with art publications, blogs, online art marketplaces, social media accounts and other informational outlets for fresh talent and breakout artists.
Art Funds
Many accredited investors participate in art funds like the Artemundi Global Fund and Fine Art Group. Managers of these funds buy and sell artwork the same way mutual fund managers trade commodities. This allows participants to invest in art without owning — or storing and maintaining — it outright.
Because of their exclusivity, art funds generally cater to higher-net-worth individuals and institutional investors. Every fund has different requirements and limits. Make sure you complete due diligence on any art funds you’re considering.
Fractional Shares
While most of the above investment types have a high bar for investors, sites like Masterworks give consumer-level investors the chance to own fractional shares of art. These platforms offer a wide range of artworks to buy stakes in, often for as little as $10.
Fractional owners earn revenue from any income the art may generate through exhibitions, rentals or licensing. Fractional share platforms are great ways to diversify your art holdings.
What to Look For When Buying Art
If you’ve found an intriguing piece of art you’re thinking about investing in, consider these factors.
Artist
Is the artist a well-known, respected figure or an emerging talent on a positive trajectory? Are their skills and technical skills solid? Is their work in high demand?
Artwork Quality
What media and materials were used in the art? Is it a limited-edition or mass-produced work? Can you document its ownership history and authenticity?
Investment Potential
Have the artist’s other works displayed appreciation or value growth over time? Is there a market demand for works of its type? Are you prepared to hold onto it for a long period?
Personal Connection
Aside from the practical and financial implications, does the work inspire an emotional response within you? Can you see yourself living with this artwork if you don’t sell it?
Find Out How to Invest in Artwork
Art investing is more personally rewarding than other common commodities. While it carries a unique set of risks and conditions, it can also help investors diversify their holdings while supporting gifted artists and communities. With the right approach and due diligence, even retail investors can leave their marks on the world of fine art.
Frequently Asked Questions
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The more you can afford, the better. Some platforms that offer fractional shares enable entry for as little as $10.
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You should invest when you have a long-term investment window of at least five years. Wait until the art market is relatively stable or even undervalued.
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There’s no concrete answer as to what kind of art is “best” to invest in. Many investors gravitate toward paintings, drawings, sculptures and photography.
