A brief overview of the top 10 reasons to invest in art as an asset class today :
1. Protection Against Inflation: Art has historically been an excellent hedge against inflation and has maintained its value over time.
As the general price level of goods and services in the economy (inflation) rises over time, so can the value of art. Because art, like other tangible assets such as gold and real estate, is not directly affected by inflation like cash and bonds are. Higher inflation reduces the value of cash and bonds, but on the other hand, can increase the value of tangible assets such as art. For this reason, art has traditionally been viewed as a good hedge against inflation, as it helps maintain investors’ purchasing power over the long term.
2. Diversification: Investing in art is a way to diversify your investment portfolio and reduce risk. As a rule – to beat downturns in financial markets, it is always advisable to have a diversified portfolio.
Generally, art prices do not always move in the same direction as traditional financial markets. For example, when stocks and bonds are performing poorly, the art market may still be stable or even appreciate. This can help to balance out the overall performance of your portfolio and reduce the overall risk. Additionally, investing in art can provide a way to diversify your portfolio geographically, as you can invest in artworks from different countries and regions.
3. Potential for Asset Appreciation: Art can increase in value, especially works by established and emerging artists. Today the overall value of the art market is predicted to be around 65 billion dollars globally with the online art segment growing at 11% cagr. Therefore, masterworks art investing either through online or offline channels should be under the radar of every investor today.
4. Low Correlation with Traditional Markets: Art prices tend to correlate poorly with traditional financial markets, which can provide stability during economic downturns. One of the main reasons is that the art market is not as closely tied to economic indicators like GDP or interest rates, and thus is not as affected by economic downturns.
5. Economic Investment: Investing in art does not require large capital every time and provides an option for people with limited resources.
An individual can start investing in art with as little as a few hundred dollars, and there are various ways to invest in art with limited resources. Example: Collecting prints or limited edition reproductions of famous artists, which are typically less expensive than original works. Also, investing in emerging artists is considered to be more affordable than those of collecting established artists’ works.
6. Tax Benefits: Art can offer investors tax benefits such as B. Deductions for Charitable Art Donations.
For example, in the United States, you can donate artwork to museums and non-profit organizations as a tax-deductible donation. This can be a particularly profitable strategy for investors who have held works of art for a long time and whose value has increased significantly. By donating to museums and nonprofits, investors can claim tax credits based on the fair market value of the artwork and avoid paying capital gains taxes on the valuation.
7. Strong Demand from Wealthy Investors: Even in times of recession, wealthy investors tend to maintain interest in and continue to buy art, which provides stability to the market.
During times of economic uncertainty, wealthy investors may turn to alternative investments, such as art, to protect their assets from market volatility. This increased demand from wealthy investors helps stabilize the art market and support prices even during downturns.
8. Decor & Emotional Quotient: Investing in art is not only a financial decision, but it can also be a personal one. Art collection can be a way for individuals to express their personal tastes and interests and surround them with beautiful and meaningful works of art that reflect an element of their personalities.
Art can evoke emotions, stimulate creativity, and inspire. Owning and displaying a work of art that you admire and appreciate can also be a source of personal satisfaction, pride, and joy. Furthermore, art can be passed down from generation to generation and become a family heirloom, with sentimental value far exceeding its monetary value.
9. Liquidity: Art can be sold relatively quickly compared to many other sectors. Hence, giving investors liquidity.
Unlike other investments such as real estate, which can take months or even years to sell, art can often be sold within weeks or months, providing investors with the ability to access their funds more quickly in case of an emergency or an opportunity for a more profitable investment.
10. Prestige Value: Investing in the arts is a sign of wealth, success and good taste, and can be viewed as conferring prestige and social status.
Art has long been associated with the elite, and owning rare works of art can be a way for individuals to demonstrate their status and prestige in society. In addition, owning artwork can also be a way to connect with others with similar social status and interests. Many art collectors enjoy participating in art-related events and activities, such as visiting galleries, museums, and art fairs, as well as attending private viewings. These events provide opportunities for social connections and networking with other collectors and industry professionals.
Conclusion: Art is an excellent choice and these points must have given you enough reasons to start your journey in art investment today.
If you have any doubts, please feel free to ask. Also, don’t forget to view our amazing fine art collection at ‘The Connoisseur’.
Article By: Sabyasachi