Thinking of investing in art as a way to pass on your family’s legacy? Now is the perfect time to do it.
Contemporary art as an investment has beaten the S&P 500 over the last 25 years. If you make a wise choice and build a solid art collection, you’d be not only preserving your family’s wealth but furthering your legacy that could serve your family well for many generations.
Of course, investing in art – like anything else – can be risky. The monetary value of any artwork depends on multiple different factors, including its intrinsic value, which is rather subjective. And there’s always a risk of forgery, theft, or damage. But, if you do your research right, you can fill your home with beautiful art pieces – and turn them into a meaningful wealth transfer.
Read on to discover how investing in art can be a great way to leave a financial legacy to your children and grandchildren.
Pros & Cons of Investing in Art
Art can be an excellent investment because it tends to hold its value over time. Unlike the highly volatile stock market, the art market does not tend to go up and down in value so much. In fact, contemporary art (works produced after 1945) has demonstrated strong appreciation even when the economy is performing poorly, like now.
According to Masterworks, contemporary art’s average appreciation in high inflammatory periods is 13.5%, whereas S&P 500 is only 5.5%. This means that art’s resell value, even during inflation, tends to remain high. Great news for anyone looking to protect their family from future financial storms!
Alas, nothing great comes without risk. We live in economically intensely volatile times, and there’s no doubt that investing in art can be a risky endeavor. After all, artists and art styles are known to go in and out of style, which can significantly affect the resale value and return on investment.
But the good news is that while art trends evolve quite rapidly, the art market has traditionally been slow to respond to change. As mentioned, contemporary art, in particular, is one asset that has managed to withstand the test of time. There’s no reason this trend should change any time soon.
Still, as a non-liquid asset, art is an investment you and your family cannot quickly exchange for money, should you need it. As an illiquid asset, art needs to be appraised before it can be sold, which means working with an art consultant or an auction house. This takes time, which is why art is considered a great long-term investment that you can pass down to future generations, but not a good short-term asset class.
Ways to Invest in Art
Typically, art does not depreciate with time, which cannot be said about other hard assets like vehicles and houses. If anything, an older painting is typically more valuable than a newer one! However, when investing, risk is always a consideration. This is why it’s essential to do a lot of research and plenty of planning before investing in any art.
One of the most important decisions when investing in art is deciding what to buy. Here are the types of art you can invest in.
This artwork refers to the “old masters” of the craft, artists like Michelangelo, Titian, Caravaggio, Da Vinci, etc. Obviously, since these pieces are rare and prestigious, they come with extraordinarily high price tags. But, if your funds permit it, investing in old masters is a fantastic investment opportunity.
Blue Chip Art
Blue chip art refers to artworks from well-known artists with a great cultural appeal. They’re not as rare or expensive as old masters’ art pieces, but they’re still widely recognized and valuable. Famous artists include Warhol, Banksy, Pollock, Rothko, and more.
If you wish to invest in art to leave a financial legacy to your children and grandchildren, but you don’t have a large budget, art funds can fill the gap. With art investment funds, you can purchase a segment of a market or even shares in a single art piece.
Finally, you can invest in the work of up-and-coming artists, of which there is no shortage. Because they have not broken into the blue-chip market yet, their artwork can be bought at very low prices, which can offer you and your family a fantastic investment opportunity. However, this type of investment requires a lot of research, and preferably experience, as well as guidance from a professional.