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How to Invest in Art: 5 Ways

How to Invest in Art: 5 Ways

Most investors stick to traditional assets like stocks and bonds, usually because they're comfortable with the familiar. However, adding alternative investments to your portfolio can provide broader diversification, help reduce volatility, and yield higher returns. Art is gaining traction as an alternative investment option—and not just among the ultra-wealthy.

Different types of art to invest in

The art world offers numerous options for investors. The best ones for you depend on your goals, risk tolerance, and interests. Here are a few to consider.

Blue-chip art

Blue-chip art refers to high-value works created by artists with an established history of stability and demand in the art market. These artworks consistently command high prices and become more valuable over time, making them relatively safe investment options for investors and collectors.

"Like with stocks, the more blue-chip the art, the higher the likelihood that a painting or sculpture will hold or even increase in value," says George Lindemann, Jr., president of the board of The Bass, a prominent contemporary art museum in Miami Beach.

Emerging art

Emerging art is the opposite of blue-chip art. It comes from artists in the early stages of their careers who are not yet established. Emerging art presents an opportunity for higher returns, but it has risks. "Emerging art most often doesn't emerge," Lindemann says. There can only be so many Picassos, Rembrandts, or Warhols, he adds, but they, too, were once unknown.

"Of course, like with a tech startup, if you pick an artist who subsequently becomes famous, you can get lucky," Lindemann says. "The smartest way to buy emerging art is if you love the work or want to help the artist. Then let the future decide whether a market exists."

Limited edition prints and multiples

Prints and multiples are generally priced lower than one-of-a-kind artworks, offering a more accessible entry point for investors. They're produced in limited quantities, and are usually signed and numbered by the artist. While not as exclusive as original artworks, prints and multiples can appreciate in value, especially if the edition sells out or the artist's reputation increases.

5 ways to invest in art

1. Individual artworks

If you're interested in owning physical art, you can buy works directly through a gallery, auction house, or private art dealer. Choosing a good investment requires in-depth knowledge of the art market, and how works are valued and appraised. It's helpful to study artists and periods you find exciting, and visit galleries, museums, and auction previews to become more familiar with the artists' works.

You'll also want to research the artist's past market performance and growth potential—and focus on finding something that resonates with you. "It's better to buy something you love, and maybe it will hold or go up in value," Lindemann says.

2. Fractional shares of artworks

Platforms including Masterworks let everyday investors access the market through fractional shares of physical artworks by such artists as Banksy, Basquiat, Picasso, and more. Masterworks handles the entire process of researching, buying, securitizing, and storing the artwork. The company then typically holds the piece for three to 10 years while looking for a good exit opportunity, opportunistically aims to sell directly to top collectors in the art world, and shares the (potential) after-fee proceeds with investors.

3. Art funds

You won't find any art exchange-traded funds (ETFs) or index funds on traditional investment platforms. However, companies such as Yieldstreet offer funds for investing in diversified pools of artworks by blue-chip, mid-career, and emerging artists with as little as $10,000. Investment decisions are based on third-party appraisals and analysis from a proprietary database managed by Yieldstreet subsidiary Athena Art Finance, which has funded over $400 million worth of fine art investments.

4. NFT'S

A non-fungible token, or NFT, is a virtual deed conveying ownership of a digital asset created on a blockchain network like Ethereum. Sales and transfers are recorded on the network, producing a verifiable price history and provenance ledger. NFTs experienced meteoric growth just a couple of years ago, with the top NFTs selling for millions and even tens of millions of dollars. However, the NFT market has significantly declined, and it's unclear if or when the market will recover.

Lindemann says NFTs had a moment, but it's passed. "Perhaps the most blue-chip of the NFTs will survive over time, but who knows? If you always wanted a particular NFT but could not afford it, now might be a good time."

5. Art Stocks

Another option for investing in art is to buy shares of companies involved in art. However, many art-related stocks are high-risk penny stocks or thinly traded (or both), so they're often illiquid investments that could be difficult to buy and sell.

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