07/11/2022
by Tina Manzer
Actually, investing in art is more the point according to, well, everyone. “Diversifying your investments isn’t just about wisely weighting your portfolio between stocks and bonds. Alternative assets such as fine art might have a place in your portfolio as well,” noted an article in The Motley Fool this June.
Likewise, a story from Investopedia, also in June, reads, “The art market is fickle, and there are no guarantees of profitability, but with a little legwork and forethought, you can fill your home with images that may prove worthy assets down the line.”
And this from Forbes: “One unexpected silver lining of the pandemic is that more people are starting to see the benefit of art as a viable form of alternative investment.”
Here’s why we’re hearing this conversation right now.
The art market is booming.
During the first five months of 2022, a series of high-value auctions in New York took Sotheby’s, Christie’s and Phillips total sales to more than $2.5 billion, reports NPR.
People have money to spend.
“Savings are still high as a result of stinted consumption from the pandemic,” wrote Bloomberg Opinion Columnist Tyler Cowen. “Many of the wealthy have been buying additional homes and wish to furnish them with art.”
They don’t have to be rich to invest.
Forbes noted a recent uptick in the sales of limited-edition prints, especially among younger collectors and those with more modest budgets. “They are an affordable and accessible way to access highly promising artists without the prohibitive price tag of an original work. They also possess good investment potential – as the reputation of the artist grows, so will the value of the print.”
Masterworks, an alternative investing startup, sells fractional shares in works of fine art – even works by high-ticket artists like Banksy and Basquiat – at accessible prices, and with no minimum investment requirement. “The platform offers good research and support resources, and features a well-designed, easy-to-use interface,” says Forbes Advisor.
Art is an inflation hedge.
There are few true inflation hedges these days, notes Bloomberg’s Tyler Cowen. “Technology stocks have taken a deep dive, blue-chip stocks are ailing, stablecoins aren’t stable and don’t even ask about traditional crypto. But art can serve as an inflation hedge in almost any environment. It’s both an investment and a form of consumption, and the latter is quite protected against any macroeconomic conditions. When all else fails, spending money is one surefire inflation hedge. Art also happens to be a durable asset, so the expenditure is not entirely wasteful.”
At the height of the pandemic, there was a “mini-boom” in the high-end art market. Bendor Grovesnor, a British art historian and former art dealer, told NPR, “It was a moment where basically bored rich people were transferring the money that they would normally spend on services to stuff.”
He thinks the current sales surge is different; likely connected to the fall of the value of some cryptocurrencies and NFTs.
“It seemed that there was a risk that traditional art lovers might find themselves eclipsed by crypto-art and NFTs, but that doesn’t look like it’s taken off,” Grovesnor said. “So the primacy of the painting on canvas is with us still.”
One more point: No matter what the financial markets are doing – rising or tanking – the art market isn’t affected much. “That’s exactly what investors should be looking for when they want to diversify their assets,” says The Motley Fool.
