The Finance World Magazine| Edition: March 2023

when it was commissioned.
From January 2020 through June
2021, the Masterworks.io All Art Index
achieved a 28.2% return – equivalent
to broad, publicly-traded risk asset
classes including developed market
stocks, developing market equities,
and commodities, as noted by a 2022
Citibank Report.
Hedge Against Inflation
According to Masterworks internal
research, during times of inflation
equal to or more than 3.0% from 1985
to 2020, Post-War & Contemporary art
prices had an annual average actual
price gain of 23.2%. According to Art
Net, during periods of high inflation,
art sales tend to grow, signalling a
greater volume market and probable
higher price appreciation.
Aesthetic Value
In comparison to other investment
vehicles, art is a tangible asset that
you may enjoy while keeping it in
your portfolio. Because this is where
the majority of the value of art is
obtained, individuals who acquire it
should value it.
What Are the Risks of Investing
in Art?
When determining whether to invest
in artwork, there are a few factors to
consider, just like any other investment:
• Illiquid & Long-Term Asset
Investing in artwork is akin to
investing in real estate or vintage
vehicles in that they are very illiquid
assets that cannot be quickly sold for
cash. It is generally difficult to find
a buyer for any collection, especially
highly priced paintings. Finding a
buyer on short notice might be very
tough. There are specific routes that
must be followed in order to sell a
work of art. Art investing should be
part of a wider long-term investment
plan and should not be anticipated
to provide regular income or to be
liquidated quickly.
• Costs and Fees
Investment worthy objects of art
rarely come with a tiny price tag.
There are, of course, art investment
funds and fractional shares of
artwork that allow an investor to
add art to their portfolio without
spending a million dollars. If an
investor wants to buy the art right
away, they will need to spend
some money on a desirable piece.
Handling, storage, and insurance are
all costs that may add up quickly.
Art investors frequently aim on
keeping onto artwork for a long
time, in order to let it increase
in value. Meanwhile, the investor
would be required to pay for upkeep
and repair.
• Counterfeits and the Threat
of Destruction
The collections market is crowded
with counterfeit objects, and it
would be simple to fall victim unless
an investor is highly informed
in assessment. Before making
any investment, it is critical to
conduct research on what you are
purchasing. There are strategies
to assist avoid becoming misled
including: examine the certificate
of authenticity; research the edition
number; and examine the materials.
Working with an expert or a third
party, such as purchasing from an
auction house or working with
an appraiser, is another strategy
to avoid falling for a counterfeit.
Investing in art funds or fractional
shares relieves the investor of the
burden of authenticity.
How to make your first investment
in art?
Art may be purchased simply from
galleries and auction houses (both
physical and online). You might also go to
local art shows. Online publications and
social media platforms like Instagram
can assist you in discovering artists
you like, and you can purchase works
straight from the artists’ websites. You
might also explore the realm of NFTs,
which symbolise ownership of digital
art. However, art investments may be
made in a variety of methods, each
with a different level of risk and profit.
• High cost and high risk:
Original artwork may be purchased
at art fairs, galleries, and auctions,
but doing so carries the highest price
and risk. Try to purchase pieces
from a budding artist in the hopes
of discovering the next Banksy. A
unique painting or sculpture may
one day be worth considerably more
than you bought for it, or you may
find it difficult to sell it.
• Low risk and low cost:
Instead of purchasing an original,
consider purchasing a reproduction
of an original painting or sketch.
Many artists and galleries will create
limited-edition prints of their works
and allow customers to purchase
them at a specified retail price
on their website. A high-quality,
limited-edition print may be quite
valuable and costs a fraction of
the price of the original. However,
because prints aren’t generally oneof-a-kind,
they don’t appreciate as
much as originals.
• Low risk and high cost:
You may acquire works by “bluechip”
painters like Andy Warhol,
which keep their value better but
provide less financial appreciation
or upside. Blue-chip painters are
those whose works have the highest
steady worth and are not subject
to fads and speculation. Many firsttime
investors cannot afford to
purchase a high-end painting or
sculpture, but numerous funds allow
investors to purchase shares in a
holding company that will purchase
a high-end work of art.
Additionally, if you are going to
purchase particular works of art,
you will most likely want to purchase
works that make you joyful. If you
invest $10,000 on an unattractive
artwork because you expect its
value to grow, you’re losing out on
the fun element of investing in art
vs other asset classes.
In conclusion, investing in fine art
may be a suitable fit for you if, you
have a strong interest in art and
are eager to learn more about it,
or if you already have a portfolio
of other investments and want to
diversify your holdings. also, if
you have an extremely high-risk
tolerance, are willing to own a piece
of art indefinitely, and can afford to
maintain and insure the items you
purchase, investment of art is the
right investment for you.
On the other hand, you should avoid
investing in art if you anticipate
returns that outperform the stock
market, or if you have no intention of
displaying the works you purchase.
If you want to be able to rapidly
and conveniently liquidate your
assets, you should not invest in
this area as well.
March 2023 www.thefinanceworld.com 109