Art has an extensive history as a transactable asset. From that time to today, the art market has grown to an estimated global value of $1.7 trillion and sees nearly $60 billion in annual transaction volume, legitimizing its place as a significant alternative asset class. So, is it time to consider art as part of your investment strategy?
As an asset class, art generally remains uncorrelated to traditional investment vehicles like equities or bonds. This is because factors that move the art market include the growth of net worth among individuals and the diminishing supply of available artwork in the secondary market, as pieces are acquired by permanent collections or museums rather than policy decisions, global conflict, or quarterly performance reports.
The benefit of somewhat unique appreciation factors in the art market, coupled with the market’s uncorrelated nature, is that the art in your collection can be a stable investment. In a time of rising inflation and volatility in the global stock market, art maintains its value and can even appreciate. In fact, tracing contemporary art sales to the total return of the S&P 500 between 1995 and 2020 shows that contemporary art outperformed the S&P by 14%.
Furthermore, the driving factors of the art market allow the asset to perform well in years where assets more strongly correlated to economic factors performed poorly. For example, in 2008, when global equities markets were down 40%, contemporary art saw a 9% increase.
Art can be a strong and strategic diversifier in your portfolio; however, it is important to note that art appreciates slowly and is considered an illiquid asset. Art might not shoot to the moon overnight like some individual stocks; it should be treated as a long-term investment. When it’s time to sell your art investment, it takes time to connect with the market and find the right buyer. These reasons, however, do not detract from the overall value of adding art to your investment portfolio.
If you are ready to invest in art, do your research. Learn about the artist and the provenance of the painting if it is from the secondary market, and take care of the originals if you decide to buy them firsthand. Additionally, find art that fits your space and enjoy the artwork’s aesthetics since it’s a long-term addition to your portfolio.
Understanding how art fits into an investment strategy can be a powerful way to minimize downside risks associated with traditional assets and improve returns in a growing art market.
Let Amparo be your source for original works of fine art. Browse our collection of original art from renowned artists in the Mid-Atlantic region to add to your portfolio. Visit our website and use our virtual staging tools to shop with confidence that our art will fit your space.