Considerations For Adding Art To Your Investment Portfolio
Dec 16, 2021,08:00am EST
With the investment landscape continuing to evolve and change during the Covid-19 pandemic, many investors are reviewing their investment portfolios in order to maximize their return. A recent survey carried out in the U.K. revealed that 29% of investors "significantly altered" their investment plans as a direct result of fluctuations caused by Covid-19 — this figure increased to 56% among those surveyed who had portfolios worth more than £1 million.
There is no denying that many challenges arose for investors as a result of the pandemic, with many investors holding back on more risky investment decisions or simply pausing their strategy altogether. Yet, as we move forward, art investment is gaining momentum as a wise choice for long-term gains.
As interest rates continue to remain low while the economy in many places remains somewhat uncertain, some investors are turning to more stable markets. True, the art world doesn’t bring with it the incredible quick wins that other investments can provide, yet as the founder of an art studio, I've seen how art investment not only offers investors the chance to own something beautiful, such as a bespoke painting or sculpture, it can also provide fantastic returns in the long run if you are willing to be patient.
Why does art make a good investment?
Owning the right piece of artwork can be a shrewd investment if you know what you are looking for. Works from some of the most famous artists in the world can sell for millions at auction; however, you don’t have to have millions in the bank to become part of the art investment world.
The key to making art investment work for you is to invest in the right pieces by the right artists at the right time. Keeping your finger on the pulse of the art world will help you to discover how art could become a lucrative addition to your portfolio, so it's important to do your research before you part with your hard-earned money. As with any investment, there is risk involved, but if you’re clued up, the journey can be easier.
Art investment comes with many benefits. Unlike a lot of investment opportunities that rise and fall with the market, owning a piece of art provides investors with the opportunity to enjoy a tangible asset, which retains a residual value. Art can provide a totally independent form of investment, making it a solid choice during times of economic instability, such as throughout the Covid-19 pandemic. By diversifying your portfolio, you may be more likely to see gains in your investment, even when stocks, shares or real estate are not performing.
However, it is key to note that art investment is a long-term strategy and requires a long-term approach. You won’t see the rapid fluctuations you get with stocks, shares and bonds, so if you want something more fast-paced, art investment may not be for you. Art investment has a proven track record and can perform better than many other assets.
What are the risks?
Although there are many positives and upsides to investing in art, like anything, it can come with its potential risks. With the potential for counterfeit artworks, it is essential you receive the appropriate documentation to prove the authenticity of the artwork. This can come in the form of a certificate of authenticity or letter of provenance. There are so many different factors at play when it comes to purchasing art, so it is essential you do your research and verify the value of the work.
What is the best approach when investing in art?
When investing in art, there are two key elements you need to have in the back of your mind at all times: attention to detail and patience. If you’re at the beginning of your art investment journey, it can be very difficult to know where to start. After all, there are so many different forms and mediums of art, from digital art to street art and everything in between. Ultimately, you need to do your due diligence before making that initial investment.
Investing in art also boils down to personal preference and how much you want to spend. Perhaps there is a particular style you are drawn to. Build your knowledge around this style and work out whether an investment in this area could yield some good results and whether it falls within your budget. Although art can be viewed online, I always suggest seeing pieces in the flesh, so ensure you visit galleries and museums while building your knowledge around the wider market itself.
And remember, art should form part of your wider portfolio, so I recommend you don’t solely rely on it for returns. Make sure to explore your options.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.