Although collecting art as a valuable asset should not be seen as “investing” per se, it may yield positive returns if done correctly with proper due diligence and education. Similar to your financial portfolio, an art collection may also benefit from diversification, but art should generally be viewed as a long-term hold investment. Over time, the value of top-tier paintings and sculptures has risen significantly. According to the Artprice100 index of blue chip artworks, which is the most stable segment of the art market and includes works by the 100 best-performing artists at auction in the previous five years, art values rose 405% between 2000-2020. That’s more than double the US stock market’s 156% rise. 

The caveat is that this comparison does not take into account dividends paid by S&P 500 companies: that would add another 128% to the S&P 500’s performance. Unlike equities, art typically cannot pay dividends other than the enjoyment of viewing it on your walls. The payout only generally comes when you sell it, unless you are able to leverage your collection as collateral in an art loan.

The traditional route of buying art is by visiting a brick-and-mortar venue and seeing an exhibition. The process of buying and selling art is typically centered around auction houses and galleries, which hold regular public events and organize private sales. There are many other ways to build your art collection too – such as using online platforms, visiting art fairs, or consulting expert art advisors.

In the past few years, new platforms have developed ways of owning art as well: a single artwork can now be securitized, and the ownership is fractionalized so that you can purchase shares of an artwork. The idea is to access art’s investment potential without having to commit large sums of cash to buy entire pieces, making it much more accessible to the general public.

Art investment platforms are on the rise and function in different ways. Some purchase the artwork themselves and create shares that you can buy, managing the process as well as storing and insuring the art on your behalf. Other platforms may not buy art directly, but instead connect you with art owners who might want to sell a fraction of their pieces. Knowing which approach any given platform uses can help you understand the complexity of your investment.¹

The recent explosion of art minted as non-fungible tokens (NFTs) is another example of how the art market continues to evolve. Digital creators are now able to make and sell artworks to a community of like-minded individuals, leveraging blockchain technology to make sales and verify ownership.² 

Before you invest in art, think about these three key things:

• Historical importance of the artist 
  The more recognized your artist is by major institutions, scholars, dealers, and critics, the better. Choose wisely to find the most representative and important examples by that artist – nuances can make all the difference in value in many cases.

• Buy with your eyes, not your ears

• Quality over quantity 
  If you’re buying works outright (as opposed to shares), you’re probably better off spending your money on one or two important pieces, even if they are more expensive, than over a handful of less expensive ones. Highly rated, critically acclaimed work naturally tends to be pricier. But don’t fall into the trap that just because a work of art is expensive that it is important – do your homework on the artist and the artwork.