The art market may be as old as time, but it’s also an exciting new investment frontier for Baby Boomers and Millennials alike.
According to the 2019 Art Basel and UBS Global Art Market Report, global art sales reached an estimated $67.4 billion in 2018, a 6% increase from 2017. This growth is in part fueled by global millennials, according to the report.
A tangible asset that won’t disappear as markets fluctuate, art’s growth within the alternative investment asset class is no surprise.
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Here’s why investment in art is becoming increasingly popular, and why you should consider adding it to your portfolio.
- Art has low correlation with other asset classes. While diversifying your portfolio with stocks, bonds, mutual funds and beyond helps to protect your portfolio, so does including art, which is highly differentiated from more traditional asset classes.
- Art protects against inflation. Art holds its value. Not only have art prices historically kept pace with inflation, it has outperformed more traditional asset classes including equities and bonds over certain time periods, according to The Art of Investing, a 2013 report by JP Morgan.
- Art increases overall returns. According to the Art Market Report, buyers rated expected return on investment as their highest financial motivation for purchasing art, above even using art to diversify risk or hedge against inflation. Millennial and Gen X collectors rated this consideration much more highly than the older age groups. As millennials continue to see value in art as a strategic investment, the market will likely continue to grow.
- Art is increasingly accessible. The online market reached an estimated new high of $6 billion in 2018, representing 9% of global sales. This is up 11% from the previous year, according to the Art Market Report. Historically an opaque and exclusive market, the growth of the online art market is making art purchases more accessible. Masterworks offers an innovative model that allows investors to buy shares of famous pieces of artwork, further democratizing the market.
- Art can be affordable. Although art remains highly appealing to high-net worth individuals, it’s not limited to this group. While online art sales are growing, online-only companies still sell the majority of their works in the segment of $5,000 and below, with less than 10% of transactions reported at price points above $250,000. According to the Art Market Report, only 4% of online purchases were worth $1 million or more.
- Art is a tangible asset that has both historical and strategic value. According to the 2016 Deloitte Art & Finance Report, 72% of art collectors said that they bought art for passion with an investment view.
But, not all art is created the same; specific genres, including the classics, perform better than others. If you’ve considered adding art to your portfolio previously, now is the time. But be sure to do your homework on what you are buying before you jump in.
Have questions? Masterworks can help.