Art As An Investment?
By Nicole Negoita
Art has always positioned itself as one of the favorite assets in luxury investments. And rightfully so, as it can be a source of investment that can generate incredible returns on investment over time.
A work of art is not just a painting or a sculpture; it is also the meaning and value that people want to give it. This, transferred to finances, means that when you buy work you not only have the piece, but you also acquire an asset capable of being revalued.
Art can play many roles within an investment portfolio, making it an attractive asset for retail investors. First of all, art can act as a portfolio diversifier. By allocating a part of the investment portfolio to this asset, you are reducing your exposure to risk by spreading the money between different investments. This is important because art is an asset class that is not correlated to other major asset classes in the stock market. This means that when traditional assets (such as stocks or bonds) are underperforming, alternative investments – such as art – tend to maintain market value.
Second, art as an investment can also be a way for investors to preserve their wealth. Art hedges against inflation. This means that works of art are a physical asset, and physical assets tend to do well in times of inflation… Like stocks and bonds, art can appreciate in value. It is a long-term investment, not mature and is subject to global cycles. If an emerging artist has a successful career, the cash value of her work will skyrocket. Additionally, the onset of the pandemic presented a challenge for the art market, with global sales of fine art and antiques in 2020 totaling approximately 47 billion euro, a 22% decline from the previous year, according to Art Basel and UBS Art Market Report. And since we are now going through an inflationary phase in our macroeconomic cycle, art can be a very good protection against inflation.
Investing in art is more of a calculated decision than simply having a passion for art.
Visiting high-class art galleries, and attending auctions and exhibitions is very important. It is this environment that can help you realize the best way to identify trends and artists that can become a good investments. Try to keep in touch with galleries where the artist is showcasing his artworks – this will allow you to keep up to date with an artist’s journey from an artistic point of view; not all artists fare well on the art market.
HOW TO KNOW IF AN ARTIST IS A GOOD LONG-TERM INVESTMENT
It is important to mention the importance of research prior to purchasing a work by a certain artist. Doing your due diligence and research is key to understanding the moment in which the artist is in his/her artistic career. Is it an emerging artist, or on the contrary, an artist with a long and established career in the art world? It is important to pay attention to the number of exhibitions (both collective and solo) and the galleries or museums in which they have been held. Were they held in reputable galleries/museums or in small obscure ones? The number of solo exhibitions and the reputation of the place(s) where these were held are crucial evaluation criteria. These two factors are indicators of how an artist positions himself in the art market are directly proportional to how established he is in the art world (both in terms of value, as well as in terms of sellability.
It might be helpful to get acquainted with a favorite artist to see how they’ve grown their brand and whether that growth is sustainable in the long run.
If you want to invest in art have to look at artworks that have been traded multiple times (to) see if you can get real comparisons in terms of growth rates. Since you likely to keep that piece of art for some time, understanding the performance of similar pieces can be a useful indicator of the benefits to expect.
Do some prior research on the artist, see how their prices have evolved and/or fluctuated over the years. If, for example, prices have been rising steadily, then it is very possible that you have stumbled upon a gold mine. Artists whose prices continue to rise are the best investment you can make in the long run.
Again, I cannot stress enough here the importance of ART GALLERIES in this foregoing investigation process, since their advice is key – as galleries know the artistic careers of their represented artists better than anyone.
If you are considering investing in art, pay us a visit at BLIZZ ART GALLERY in Puerto Banus. You can find us in Calle Ribera, C asa N, Local 18, 29660, Puerto Banus (Marbella). Our specialized team will sit down with you to help you find the best artist for your portfolio.