In times of crisis, such as those forecasted for this year, it is advisable to seek a safe haven. And in the field of investment, fine art is an excellent alternative.
While investing in fine art, like any other investment, can be complex and risky, if done properly it is a good way to diversify your investment portfolio as it is not correlated to stocks or other financial assets.
Fine Art can serve as a hedge against inflation since the value of art tends to increase over time, while the value of money decreases. As well as being a great way to invest in someone's passion or interests, it can be useful to you for estate planning purposes as it can be passed down to future generations and potentially appreciate in value.
When is the best time to invest in Fine Art?
2023 looks like a gloomy year for the economy. David Malpass, President of the World Bank Group, commented; "Global growth is slowing sharply, and a further slowdown is likely as more countries enter a recession."
Given this scenario, art as an investment stands out as the best alternative to the traditional market. Here is some data:
Citibank's artistic advisory department indicated that the art market grew by 13.7% between 2000 and 2019.
On the other hand, Art Market Research calculates that in the last 10 years, the revaluation of works of contemporary art was 12.4%.
The Art and Finance Report 2019, carried out by Deloitte, proves that the index of the 100 most profitable artists had a growth of 8% in the last 8 years. In that same period, the S&P 500 only grew by 3%.
In addition, investing in oil paintings and art in general is usually a great refuge in bearish times. According to Masha Golovina, Director of Market Analysis at Masterworks, the art market has a difference of up to 18 months from the stock market.
In other words, the crisis that will now hit the stock market will not reach investment in art until at least mid-2024.
On the other hand, according to data from MeiMoses, the price of art and oil paintings tends to fall much less than that of stocks. For example, in the 2007-2009 crisis, art auction prices fell 27.2%, while the S&P 500 fell 57%.
So if you want to invest in fine art, now is the time.
Why is it a good idea to invest in Art right now?
In inflationary periods like the current one, art offers you the perfect cover. According to Masterworks, between 1985 and 2020, when average inflation was above 3%, the price of art skyrocketed by 23.2%.
In addition, Art Net points out that in times of high inflation art sales increase, which induces a greater market volume. But these are not the only reasons to invest in art.
You should also keep in mind that it has a low correlation with traditional markets. That is, a potential crisis in the stock market would not affect your investment in art. This is according to a Citibank report.
Is it very expensive to invest in Art?
This is one of the biggest myths surrounding fine art investment. Many experts on the subject consider it a stereotype.
Belén Puente, director of communication for the Ansorena auction house, told Business Insider the following: "It is a general belief that at auctions, for example, there are only very expensive works. At Ansorena we hold auctions every month and, of course, works with high prices are presented, but it is also possible to buy landscapes from a 17th-century Flemish school for 2,500 euros, an 18th-century piece of furniture for 600 euros or an engraving by Tàpies from 300 euros».
There are many different ways to invest in fine art, including buying and owning individual pieces, investing in art funds, or participating in art-related businesses such as galleries or auction houses. So you don't necessarily need a lot of capital to get started.
However, it is important to note that investing in fine art, like any other investment, carries risks and there is no guarantee of a return on your investment. That is why it is always important to do your due diligence and research the artwork and the artist very well before making a decision.
In a future article, I will be sharing what you should keep in mind when doing your research. So if you found this article useful, I invite you to subscribe to my blog at www.rodmndz.com