Savvy collecting isn’t just about acquiring art. It’s important to stay informed about the current value of your collection, and rotate works as the market evolves. We're here to help with this weekly series of art investment tips. Don't hesitate to contact our staff with any questions.
TIP 1: THE SECONDARY MARKET
The secondary market refers to art that has been sold at least once before. There are many threads—auction records, museum shows, major articles featuring the artist—that help us determine how to value a piece. One thing we know about secondary market artwork is that it retains its value better than other investments like stocks. History shows that valuations of work by time-tested artists, while not immune to fluctuations in the larger economy, are often insulated from them. There is a major impetus to acquire as an investment.
TIP 2: MARKET CYCLES
We are in a moment of incredible possibility in terms of artistic creativity and a re-evaluation of art world hierarchies. This is an excellent opportunity to enter the market and obtain great works at excellent prices. The art market is cyclical, as are many other global markets, and a downturn inevitably brings about another boom. This is the moment many have been waiting for: a chance to jump into the game.
TIP 3: ART, INSULATED
Any investment involves risk, but there are built-in shock absorbers to acquiring time-tested artists on the secondary market. On average, return on investment for art is 7.6 percent annually. That's a bit lower than the 9.8 percent annual return that's averaged by stocks on the S&P 500. Then again, stocks are highly sensitive to the shifting winds of the global economy, while art tends to accrue value at a more stable rate.
Tip 4: Diversify
The value of art is not linked to the stock market, which means collecting is an excellent way to bolster your portfolio. Stake out a percentage of your portfolio for art investing, and consider it a long-term investment like a bond. Art is an illiquid asset—it's hard to generate cash quickly from reselling your collection—but work by time-tested artists tends to appreciate steadily over periods of 5 to 10 years. That's why buying on the secondary market is a great place to start if investment is your goal.
TIP 5: RIDE THE WAVES
88% of wealth managers consider art an important part of a well-balanced investment portfolio (Deloitte, 2017). To understand why, let's look back through the years. In 2018, blue-chip artwork rose in value by an average of 10.6% while the S&P 500 fell by an average of 5.1%. Similarly, the blue-chip art market was on the rise at the start of the last recession, and remained stable relative to the stock market throughout the downturn.
TIP 6: ART VS. BONDS
Acquiring bonds is considered a reliable long-term investment strategy, but how does it stack up against art investment? It's an even matchup. In the last three decades, art investing has yielded an average return of 7.5%. Investment-grade bonds clocked in at 6.5% averege return, while global high-yield bonds hit an average of 8.1% (Citi, 1985-2018). Objects with intrinsic value such as art, gold and diamonds can be hedges when interest rates are low—just like bonds.
TIP 7: invest, digitally
This week, read about the art world moment that “instantly established the legitimacy of the market online." The shift is especially relevant for fine art prints, because they exhibit well online and they're more affordable than other artworks. "Attitudes among collectors are evolving," Artsy writes. Click here to read the article.