Investment

How to Invest in Art: Expert Tips for Beginners

Explore traditional and modern methods to include artworks even into a portfolio of a beginner investor. This guide is for retail investors who seek how to invest in art.

By

Dmytro Lokshyn

on

July 25, 2022

Table of Contents:

What do $450 million and a feeling of absolute bliss have in common? The answer can only be one:

Da Vinci’s ‘Salvator Mundi’.

First bought for $1,000 in 2005, it was covered in smug and dirt. A genius artwork, almost lost to modern society. The current artwork holder, the Saudi Prince paid a modest sum for the restored art in 2017, and it has been traveling the world since.

Four hundred and fifty million dollars. A booming 45,000,000% growth in value in just 12 years.

New York Times

If we were asked how to get rich investing in art, this would be the case study to explore. There are very few artworks to invest in that can match this ROI. However, this alternative investment option catches the eye of many investors–high average returns combined with the esthetic beauty of art even created a new trend in Google Search queries:

How to begin investing in art?

You can be a seasoned Wall Street shark wishing to hedge against the market that has been hard on you lately. You can be a collector looking to profit from your investment in a hobby. Or you can be buying art for beginners and trying to avoid the instability of stocks or crypto.

Either way, buying art for investment is a perfect alternative for your portfolio.

This guide on how to invest in art is perfect for beginners to gain knowledge about the art market: where to go, and how to invest in art paintings with minimum risks.

Why investing in art is a Good Idea?

Art inspires, art is something that you can fully own. It is our history and our teacher. Art is a $65.1 billion market that generates long-term returns that often equal bonds.

Is investing in art a good idea? Depends on how the following numbers appeal to you:

  1. Since 2020, blue-chip art outperformed S&P 500 by a total of 200%. That’s 4.5% better every year, more than 20 years in a row.
  2. Art compounded an 8.5% rate for the last 18 years.
  3. Blue-chip art has 0 correlation with the rest of the markets.

But what do these numbers mean, really? Here are some reasons to invest in art that should explain it a bit better:

Art appreciates art

If you look to invest in art for beginners, you’ll discover that artworks tend to go up in value. Investing in art generates more profits than investing in major indexes. The art investing market outperforms traditional investments in terms of ROI. 

You actually get to own something emotionally valuable and esthetically pleasing. Owning ethereal shares of a tech giant will never feel as good as investing in artwork.

Art is always popular

Investors show increased interest in art when inflation hits anywhere above 3%. Art showed an annual average real price appreciation of 23.2% during the years indicated in the Masterworks research (1985-2020).

ArtPrice

Art market is highly active when traditional finances go south. Investing in artworks is the most beautiful way to hedge against inflation.

Art cares only about art

Investors rarely admire the beauty of art, so long as it is not the beauty of a growing portfolio. That’s why it’s not the artist’s genius that sparks investors’ attention. 

It’s zero correlation.

Art prices in no way or manner depend on anything that is not art. Highs and lows in stocks, bonds, gold, real estate, and private equity don’t matter to art. 

Art prices in no way or manner depend on anything that is not art.

This ‘independence’ from other markets is a very important factor for savvy collectors, who want to invest in the art to diversify their portfolio and hedge against unexpected market fluctuations.

How to invest in art in 2022

Technological progress and covid-19 helped revolutionize and innovate many areas of our lives. Fitness bikes replaced coaches, and digital tokens tried to replace the crust of fresh dollar bills in our pockets.

Traditional investing methods sought to attract new generations and embraced technology. This led to popularization and increased transparency in the art investment market. Below, we will explore 5 key ways how to get started investing in art, and try to find the tools that will suit your investment needs and current investing opportunities.

1. Auction houses

Auction

Currently, the most common way how to invest in art as a beginner, and the biggest pre-owned art market in the world. Investors can place bids in online auctions or visit live events and bask in the unmatched charm and vividness of a blue chip art auction.

Alas, investors must be ready to write off big checks. Often when investing in artwork, a buyer’s premium is paid. In some cases, you can end up paying up to 30% of the sales price. In the case of Salvator Mundi, Sotheby’s 12.5% premium was already included in the $450M that the buyer ended up leaving at the auction house.

Can you do the math?

Where to do this: Sotheby’s, Christie’s

2. Art Galleries

Art Gallery

Rarely one can find a better place to invest in curated artwork collections than art galleries. They comprise the biggest market for primary art sales, and this is the place to find and invest in up-and-coming artists in every region of the world.

More often than not, art galleries demonstrate artwork that has never been sold before, which creates a great opportunity to become the first investor and owner of a soon-to-be-legendary artwork. Hopefully.

Art galleries demonstrate artwork that has never been sold before

And yeah, no extra fees, you only pay what you agree upon with the gallery. Art galleries are the perfect answer to the ‘how to make money investing in art’ question.

Where to do this: Gagosian Gallery, Pace Gallery

3. Art fairs

Art Fair

If you’re looking how to invest in artwork after meeting artists in person, consider going to art fairs–a place where you can buy art directly from the artist. Here, you will often find the most beautiful pieces that will look amazing on your wall.

But its value will only be determined when you will be selling it for the first time. You will become its first appreciator. 

Where to do this: La Bienale, Art Basel

4. Art funds

Investing in art funds

Art funds work by collecting money from their investors and using it to buy art, and then sell it for profit to generate returns. Most funds are privately owned and curated by an advisory firm, or an art investment management group.

Art funds operate in exchange for a management fee, as well as the portion of all returns that the fund has delivered.

Where to do this: Artnet, InArt

5. Art fractional shares

Turf War by Banksy

Investing in fractions of art is the youngest of art investing methods. Thanks to updated regulations and advancements in technology, investors have an opportunity to buy fractions or, in other words, parts of art’s value.

How does it work?

The company sources, verifies, acquires, and insures artwork before locking it away in the vault. Its cost is then split into equal-priced fractions, and these fractions are auctioned off on the platform. 

Investors receive non fungible tokens (NFTs) as proof of their investment and ownership. If you become an owner of 100% fractions of the collection, you can even exchange NFTs for the physical asset, and get it delivered to you!

Where to do this: Investables, Masterworks

Read on and explore expert tips on how to invest in works of art and make a profit with fractional shares ownership!

Tips for beginners on how to invest in art

It is to get lost in artwork’s colors, shadows, and intricate lines. But don’t get too carried away! Investing in art has its own obligations, procedures, and risks accompanied by expenses, of course.

The process of investing in blue chip art was hidden from plain sight long ago

Here, we will consider the major risks of investing in art and how to mitigate them using trusted investment tools and methods.

Risks of investing in art

Art is an alternative asset to invest in. Thus, it comes with risks that you won’t often find on a stock or crypto market. For years, art has been a pricey investment and the process of investing in blue chip art was hidden from plain sight long ago.

Can modern investing methods help you mitigate those risks and reap the profits of art investment? Let’s find out!

Art is Illiquid and long-term

The process of buying and selling collectible art cannot boast speed among its better qualities. There simply aren’t enough investors who are willing to spend or make a few million once a week buying or selling art.

Art shows a great appreciation rate in the long-term perspective, but selling it to make a profit can take time–finding the right buyer won’t be as easy as a crypto transaction.

Art is pricey

Despite costing anywhere from thousands to millions of dollars, art has a bag of extra expenses related to buying and owning an artwork, from auction house premiums to transportation, insurance, storage, and restoration fees that the art owner has to consider.

But don’t think that it’s not worth it, no. Some of the most notable art investors and collectors maintain hundreds of artworks and do it for great profit.

Art can be faked or damaged

Even though great copies are also valuable, nothing generates as many returns as the original works. Investors should beware of reproductions and always consult a specialist before buying the piece. Expert art appraisers come at a fee, but even insurance won’t cover your losses if you invest in fake art as if it were real.

Buying damaged works is not recommended, as restoration is a costly and long-term process. But it’s keeping the artwork safe is what you should think of. Storing artwork in vaults and safes, and insuring it from fire, theft, and other kinds of damage will come as recurring expenses for investors in art.


Trusted art investing methods

If you’re new to the art investment world, you need to find a partner who will become your guide to investing in this alternative asset class. This can help you avoid many of the risks that we mentioned above, as well as remove any unnecessary expenses from your to-do list before investing in artworks.

Funds can become such partners, but the entry price is high for most retail investors. In addition to that, funds are in full control of your investment, making the decision to buy or sell artwork by themselves. They simply share the profits with the investors for using their money.

New era for retail investors

Technological advancement and updated regulations helped fractional investment platforms, like Investables, open a door of opportunity for retail investors to reap the benefits of investing in art. On such a platform, users invest in fractions of art which has already been sourced, authenticated, verified, stored, and insured against all possible risks.

All you need to do is determine how much you want to invest, and choose the artwork or an art collection to invest in.

Invest in fractions of art which has already been sourced, authenticated, verified, stored, and insured against all possible risks

This way art investors share the risks and the rewards together while having the opportunity to allocate an affordable budget to investing in their favorite artworks.

But there’s more–as soon as you become the owner of 100% of the art’s fractions, you can exchange them for the physical artwork. It will be at your doorstep whenever you decide.

Conclusion

In recent years, art investing started becoming more transparent and accessible, opening new opportunities for retail investors and art vendors alike to profit from a thriving, regulated market.

Fractional investment platforms like Investables start a new era for alternative assets by making investments in artwork, watches to invest in, and other collectibles more accessible, secure, and affordable to retail investors.

We believe that alternative investment methods are needed in times of instability. The increasing popularity of buying shares of art will contribute to higher volatility in art sales, thus creating a flourishing market for everyone.

Make sure to explore our collections of artworks to invest in, and sign up for our newsletter to stay up to date with upcoming investment opportunities.

Frequently asked questions

Is it worth investing in art in 2022?

Amid the instability in stocks and crypto markets, investors tend to look for something they can rely on. Art investments have a proven track record of saving investors in times of crisis and inflation. Thus, it is a good alternative investment.

What is required for a beginner to invest in art?

Find a trusted partner who can source, authenticate, and help you store and insure the artwork. If you’re not yet ready to invest a lot of money in art, fractional art ownership can become your starting point as an art investor.

How risky is investing in art on a fractional investment platform?

Lack of liquidity remains the biggest risk for art investors when investing through a fractional ownership platform. Yet, as the popularity of such investing methods grows, so will the liquidity, and it will be much easier to find art buyers and sellers.

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