If you are here to ascertain whether art investments are a viable option for you, read on to learn more about art investment returns.
As an investor, one of the pressing concerns on your mind is knowing if your portfolio is ready to withstand the next big market crash. Many people think art is a safe investment but, is this true?
One of the most important things to consider when making any investment is the potential return on investment (ROI). Art investments can be very lucrative, with returns that dwarf those of more traditional investments such as stocks and bonds.
However, perhaps another significant part of art investment returns is the satisfaction of owning a beautiful piece of art. Works of art can transform a room and elevate the mood of those who view them, and they can also serve as a source of pride and enjoyment for their owners.
But, what makes art a good investment?
Why Art Investments Are a Unique Opportunity
1. Art Is an Alternative Asset Class
With a potential global financial crisis looming, now is a good time to diversify your portfolio with some alternative assets.
Art has historically been a haven for investors during times of economic turmoil. That's because art is not correlated to the stock market, meaning it's less likely to lose value when it takes a hit.
As an investor, you might fall prey to the idea that a traditional portfolio of stocks and bonds will always offer the best protection against a market crash. But, as we've seen in recent years, this isn't always the case.
Considering the current uncertainties about global trade and the potential for a recession, it's wise to look at investing in an alternative asset that is not as closely tied to the stock market, like art.
2. Art is an Inflation Hedge
Another reason art investment returns are so attractive is that art can retain its value, or even increase in value, during periods of inflation.
During periods of inflation, like this moment, you might be on the look for investment opportunities to safeguard the purchasing power of your money. But, with more attractive options like technology stocks taking a nosedive and cryptocurrencies bleeding value, where can you turn?
Art might provide the perfect inflation hedge for your portfolio. When inflationary pressures increase, the value of art has historically gone up as well. This allows investors to maintain or increase the purchasing power of their money and safeguard their wealth from inflation. In addition, no inflation rate can take away the pleasure of owning and viewing a beautiful piece of art.
3. Art is a Tangible Asset
In an increasingly digital world, investing in a tangible asset like art is reassuring. With art, you're buying something you can see, touch, and feel, and you can also be confident that it will continue to exist long after you're gone.
This is in contrast to investing in intangible assets like cryptocurrencies or NFTs, which only exist in the digital world and could disappear overnight. Art investment returns are more secure because you invest in a physical asset with intrinsic value.
4. Art Is a Non-Correlated Asset
Portfolio diversification is one of the most important things you can do as an investor, as it allows you to hedge your overall investment risk. You can do this by including a mix of assets that don't move in the same direction, in other words, non-correlated assets.
Asset correlation measures how closely two assets move in relation to each other. A positive correlation means that the assets simultaneously move in the same direction, while a negative correlation means that the assets move in opposite directions.
So, when aiming to diversify your investment portfolio, it is vital to consider adding assets that negatively correlate to the rest of your holdings or the overall market. This creates a buffer against losses in your portfolio whenever one asset class takes a hit.
Investing in art is a great way to diversify your portfolio because it is a non-correlated asset. That means art investment returns are not necessarily influenced by movements in the stock market or other financial markets.
5. Art Is Resilient
The art market has shown to be quite resilient, even during an economic recession. In fact, the art market often outperforms other asset classes during these periods.
So, investing in works of art could be a smart move if you're worried about a potential recession or market crash. Art has the potential to maintain its value or even increase in value during tough economic times, while other asset classes may lose value.
However, although art investments are a unique opportunity, it's important to remember that they come with risks like any other investment.
The Risks of Investing in Art
1. Art is liquid, meaning it can be challenging to turn into cash quickly if you need it.
2. The value of art can be difficult to determine.
3. The art market is susceptible to fraud and forgery.
4. Art is not worth much when damaged.
5. There are other costs associated with buying art, such as storage and insurance.
Despite these risks, investing in art can be wise for those looking to diversify their portfolios and safeguard their wealth.
About Florence Bell Art Consultancy
All things considered, all investments are risky. However, if an investment's potential rewards outweigh its risks, then it's a unique opportunity worth considering.
When it comes to art, there are many potential rewards that make it a worthwhile investment. These include the fact that art is a tangible, non-correlated asset, and resilient to economic recession.
As long as you're aware of the risks involved in investing in artworks, it could be a smart move for those looking to diversify their portfolios.
But, you can take it a step further by partnering with an art consultant to navigate the art world and secure profitable art investment returns.
Florence Bell Art Gallery is a full-service art consultancy offering bespoke solutions for corporate and private clients. We offer a comprehensive range of services, from sourcing beautiful artworks to providing guidance on building a valuable art collection.
If you're interested in learning more about investing in art, read our tips for investing in art article and please don't hesitate to contact us. We would be happy to discuss your specific needs and help you find the perfect pieces for your collection.
