Is Investing in Art a Good Idea in 2023?

by Hunter Robillard

Investing in art is a good way to diversify your investment portfolio.

However, it’s best to invest in this asset if art is something you truly love. That’s because art investment can be quite risky and usually requires a lot of research.

Let’s explore the before investing in art, how you can invest in art, and the benefits. We’ll also check out some drawbacks of art investing.

Wondering which other alternative investment option might be worth it? Fine wine could be a great choice as well!

What Are the Things to Consider Before Investing in Art?

Putting your money into the fine art world might be a good investment strategy.

But, what are the things you should consider when buying art?

The first thing to do is decide how much you’re willing to spend. This includes factoring in possible storage and maintenance costs.

From there, you should find out what types of art pieces you want to invest in. For example, here are the artwork types that every passionate art collector should explore:

Original Art Piece: This is a unique, costly piece of artwork that usually offers a great return on investment (ROI.) Original art pieces that are investment-worthy include paintings crafted by an artist like Andy Warhol or Pablo Picasso.
Printed Art Piece: Refers to a rare copy of an expensive art piece. Simply put, if there are several copies of the original artwork, the “printed art piece” is the one that’s more similar to the original work. This art piece often fetches a high price on the market and offers a good ROI.
Reproductions: These are mass-produced copies of the original artwork. Since they aren’t unique, they’re quite affordable but are not worth investing in.

Now, as a passionate art collector, you can also learn more by visiting local galleries and museums. You can also attend an art fair and meet your favorite established artist and other emerging artists.

You can also search for the best contemporary art pieces from online galleries or a reputed auction house like Sotheby’s.

How Do You Start Your Fine Art Investment Journey?

If you’re passionate about art investing, you need to find an art advisor or an art investment company. This will help you invest in art pieces that are likely to appreciate in value in the long run.

To avoid the hassle of owning an art piece, you can also invest in an art fund (art investment fund.)

The art investment fund helps you buy shares for a specific art piece. Once you’ve invested, a fund manager gets blue chip art pieces at art auctions and then updates you about their performance.

You could also invest in a mutual fund (which is also structured like an art fund.) However, a mutual fund and art investment funds can be a bit complicated and risky. So, you should do some thorough research first to ensure your investment will be worth it.

What are the Benefits of Investing in Art?

Here are the advantages of investing in art:

Portfolio diversification: Putting your money into an asset class like fine art helps diversify your investment portfolio. This minimizes the risk of loss.
Performs well when markets crash: Fine art isn’t correlated to the major assets in the stock market. So, this asset class usually performs well even when the stock market and other traditional investment assets perform poorly.
Serves as a hedge against inflation: Physical assets usually perform well in inflationary times. So, a physical piece of artwork can be an ideal inflation hedge.
The art market shows a steady growth: The blue chip art market isn’t impacted by economic instability. So, art prices usually show steady growth when there’s an economic crisis.

Is Art a Good Investment? (A Few Drawbacks)

Although art investing comes with a couple of benefits, there are some disadvantages that come with investing in art:

Art may not always be highly profitable: It’s ideal to start your journey as an art investor if you enjoy art. That’s because art investment might not be as profitable as other alternative investments like fine wine. So, it usually makes sense to invest in a fine piece of painting if you already have an established investment portfolio.
Involves a lot of research: Whether you want to invest in physical or digital art, you need to be willing to do thorough research. And if you want to get the best ROI, you should only invest in artworks that are crafted by a reputed artist.
Choosing the best artist is difficult: As an art investor, you need to pick an artist or artwork wisely. However, it’s usually challenging to find emerging artists who produce art pieces that perform well at art auctions.

In fact, most of the artworks that perform well are the ones produced by an established artist like Andy Warhol or Pablo Picasso. However, these artworks usually come at hefty prices compared to that of an emerging contemporary artist.

Art is a non-liquid asset: One of the biggest problems with the art market is that it’s relatively non-liquid (just like the real estate market.) This means that it’s difficult to convert your painting into cash right away. And if you cash in on your artwork at an auction house, you could be charged around 5-25% of your sale price.
There are too many costs involved: Buying and selling artwork involves many expenses like sales tax, transportation expenses, and insurance.
Art requires maintenance: As an art collector, you should constantly maintain or renovate your artwork to retain its value. You may also have to pay a storage company to keep your artwork in a climate-controlled environment.

So, if you’re a passionate investor aiming to make money, pieces from the art world should only be a small portion of your well-rounded portfolio.

You need to consider an investment strategy with other alternative options like fine wine as well.

Why Is Fine Wine A Great Investment?

Investing in the art market is quite risky - whether you’re investing in physical or digital art. Here’s why any investor should consider investing in fine wine as well.

Fine Wine Performs Better Than Art During Uncertain Times

Investments like real estate, fine wine and art are usually resilient to slight economic swings. However, fine wine performs better than both in an economic crisis.

For example, the Liv-ex 1000 (the index for fine wine trading) dropped by only 4% during the COVID-19 pandemic. Meanwhile, contemporary art sales fell by 34% during the same period.

It’s Easier to Buy and Sell Fine Wine than Artwork

The art market is complex, and buying art is often quite challenging if you do it on your own. Also, you should ensure that your artwork is well maintained before selling it.

However, buying and selling fine wine through a professional wine investment company like Vinovestis easier than art collecting on your own.

All you have to do is sign up on the platform, complete a quick questionnaire, and fund your account with $1,000+. From there, a wine expert will manage your profile to ensure that you invest in the most profitable bottles.

It’s Simpler to Maintain Fine Wine Than Artwork

As an art collector, you need to be willing to spend a lot of money on maintenance - both of the artwork and for storing it perfectly.

Meanwhile, maintaining an alternative investment option like fine wine is easier. As long as you properly store your wine in a cellar, you can leave it there for years and watch it grow in value.

And if you’re investing in wines through Vinovest, all your wine buying, storage, and selling needs are taken care of. Your wines are safely stored in a bonded warehouse and are covered with full insurance.

Investing in Art: Is It Really Worth It?

An alternative investment option like fine art is good for portfolio diversification purposes. However, art collecting doesn’t usually offer the best return on investment.

You should also explore alternative investments like fine wine.