Being an art lover doesn’t mean that you would mind gaining some money from investing in art. In times when traditional forms of investing such as buying shares or having money in bank accounts have failed during and after the last financial crisis, investors are searching for alternative ways to grow their wealth. One of the ways of investing money that has taken over the market by storm is investing in art. Check out the valuable information that we provide you with in this article and discover a whole new world of opportunities.
Many investors and art lovers enter the market and for the very first time, many of them become heavily involved in the art market. Little economic work has been carried out into the quality of art as an asset class until recently. But this is changing now with growing interest. Many financial institutions are now constructing large databases covering many art market segments ranging from furniture to prehistoric antiques. The art market is too fragmented to draw definite conclusions about the entire asset class ‘ overall performance relative to other markets.
Cycles in the art market are not necessarily associated with those of other asset classes, and there is no connection between art prices and equity markets, just as there is no correlation within the art market between different categories. To investors who want to diversify their investments, this could make art a good choice. It is possible that some impressive returns can be made when there is a rise in art work, for example, 200%, but this is generally not the case. There are places, though, where the work of an artist is undervalued, and prospective art investors can see some of the patterns. For example, contemporary art and old masters have realized high auction prices in recent years, but investment in art should not be motivated solely financially. To use financial terminology, art is definitely that asset class, but it will never be just about the numbers.
In 2018, the Wall Street Journal named art the best investment category. As evidenced by the numbers, the art market performed much better than other markets in 2018. Blue-chip artwork reported a 10.6% average gain, while S&P 500 shares dropped by an average of 5.1% over the same time. That makes this accomplishment impressive is that 2018 was an extremely challenging year in which most markets, including gold, deteriorated. Compared to stocks, how robust is high-end art? What are the precedents for determining its tenacity in the face of catastrophic economic collapse? The financial recession of 2008 will serve as an appropriate case study.
While the financial markets crashed in 2007 and 2008, new heights were reached by the art market. The demand for masterpieces shot at an incredible $2.2 billion during the 2007-2008 economic recession. During one of the worst economic downturns in history, money flowing into the arts had nearly quadrupled. This may mean that investing in art should be your top priority if you want to have a successful, profitable and diverse investment portfolio.