The Finance World Magazine| Edition: March 2023

Investing in Art
Art as a Financial Asset: Investing in
Art Stocks
In the past, there was a notion that only certain individuals with specific skills,
abilities, and interests were able to invest in art effectively. This stereotype
created barriers for people from certain social classes, educational backgrounds,
and economic status from entering the art world. However, over time, this belief
has diminished, and the idea of investing in art is gaining broader acceptance.
Over time, many hurdles
and preconceptions about
investing in artworks have
been dispelled, and industry
insiders have been more open to
divulging their trade secrets to outsiders.
Investing in art is now a chance that
everyone can take advantage of, and
the amount you gain has very little to
do with where you begin. It may be
a fantastic investment opportunity
with a lot of study, preparation, and
knowledge of the art industry.
Recent big-ticket auction transactions
have generated substantial interest
around the fine art market. The artwork
Shot Sage Blue Marilyn (1964) by Andy
Warhol sold for a record-breaking $195M
at an auction in May 2022. According
to Art Basel and UBS Global Art’s 2022
annual study, global art sales were
expected to exceed $65.1B in 2021.
This marked a 29% rise in sales from
2020, exceeding pre-pandemic levels in
2019. They also discovered that sales
volume rebounded from Covid-19 levels,
climbing by 17% in 2021 to a predicted
36.7 million transactions.
Low Correlation to Traditional
Markets
Risk is always a factor to consider
while investing. Market risk is the
systemic risk inherent in the stock
market that cannot be mitigated by
diversification. During a market slump,
no matter how many different index
funds someone invests in, they will
lose money. Artwork, on the other
hand, is unrelated to any stock index
or market. Buying art operates as a
store of wealth wholly distinct from
regular asset movements.
According to a 2022 Citibank Report,
the connection between art and all
other asset classes is mildly positive
or near to zero. Contemporary Art
and Developed Equities exhibited
a connection of -0.04 between 1985
and 2021, while Contemporary Art
and Investment Grade Fixed Income
showed a correlation of 0.15. In fact,
art had the highest association with
real estate - another tangible asset
sector - with a correlation of 0.21.
No Price Depreciation
While art may and has historically
provided price appreciation, another
key benefit of art as an asset is the lack of
price decline. Art, unlike other tangible
assets, as houses and automobiles, does
not degrade after years of hanging on
a wall. A 500-year-old picture is likely
to be more valuable today than it was
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108 www.thefinanceworld.com March 2023