Invest in Art: An Attractive Asset

Art as a mid to long-term asset is attractive as its value generates positive real return. Over a 20-year period, post war & contemporary works of art delivered more than most stock exchange indices. Art returned a compound annual return (CAR) of 10.7 % above the S&P total return of 8.3%.Art also has a low correlation with stocks and bonds which offer diversification possibilities. Invest in Art: An Attractive Asset: Why should you invest in art? How do you even start investing in art?

Why you should invest in art?

Art as a long-term asset is attractive as its value generates moderate positive real return. Art also has a low correlation with stocks and bonds which offer diversification possibilities.

Several new initiatives around the world search to securitize several billion US dollars worth of artwork, such as art investment funds, tradable art structure products, or dedicated art trading exchanges as the unique monart platform.

We can see the development of art as an asset class and related art services among the financial institutions. The offering mainly consists of three categories of art services: art advisory services, art lending, and art investment services.

The art market is becoming more and more transparent due to research in finance and economics as well as date dissemination.

The reported returns are enough to catch anyone’s eye: the index of fine art sales –an index used by art advisors to sell art funds — shows an average annual return of 10% over the past four decades. Many so-called passion investments have gained popularity and a handful of funds are making it easier for investors of all income levels to put their money into art. In short, investors are embracing art-as-an-asset-class as if it were a newly discovered van Gogh.

The main characteristics typically used to define art investments can be summarized in the following way: high-risk investment, illiquid, unregulated, high transaction costs, and at the mercy of erratic public taste and short-lived trends. Artworks do not generate any cash flows that can be discounted, except to the extent that income can be obtained through lending and incurring expenses in the form of storage, insurance, and associated costs. Art investments are also currently virtually ‘unhedgeable’.

 How do you invest in Art ?

The first questions you must ask: What do you like? And then, what’s your budget?”. As with other asset classes, your investment depends on your sensitivity to risk.

If you are tempted to invest in the world of art, it is essential to immerse yourself in the art world as much as possible. Firstly, take a step back and think about the art market as you would any other investment. Engage with online resources such as Artnet and Artprice to get information on auctions and artist sales. Read books about the market and the history of art as a whole. Look at live auctions on websites such as Christie’s and Sotheby’s. Become as familiar with the art world as much as you can.

There are a variety of ways to collect and invest in art. There are safer blue-chip artists and there are more speculative younger artists. Because of the subjectivity and lack of liquidity, preferences are important and you have to buy something you love and can live with.

As with any investment, start by doing your research. Go to galleries, museums, and exhibitions. Meet with curators, other investors, professional art consultants, and even the artists themselves. You need to take the time to read, research, and look around. Take note of artists with ambition. Look at those that have broad institutional support, world-wide gallery support and who are being acknowledged with awards. Momentum can propel value.

Another way to find value is to look at drawings by established blue-chip artists. There are some artists with very expensive canvases but also with drawings for much less. He has paintings that sell for millions, but the drawings are still in the $200,000 to $500,000 range. But these works on paper are equally as interesting.

There can be a powerful gap between the cost of canvases by market favorites and their drawings. The disparity between paper and canvas is big.

Another place to find upside in the art market is to look at the work of diverse artists whose work can occasionally be undervalued.

Like any type of investment, you need to have a short-term and long-term plan, and cannot make hasty or emotional decisions. Don’t waste your money. Don’t buy art on a whim.

A key factor in developing a successful plan is getting help. If you want to invest at a particular level (half a million plus or $100,000 to start), you need to work with a professional adviser. Some private art-advisers act as a broker, identifying pieces that individuals would like to sell and matching them with a buyer. Other advisers are strictly buy-side, helping investors navigate the art market.

How can you make money with monart online?

The Artnet report demonstrates that blue-chip artists and artworks historically demonstrate the best returns. For many investors, that is simply a mountain too high to climb. The art world seems reserved for the very wealthy with the power to make high-value trades and purchases.

Though it is still essential for you to understand the basics when making an alternative investment in art, the monart platform is opening up areas of the market that may traditionally be tougher to access, especially for first-time investors.

With blockchain, you can participate in the first art stock market. It’s a direct art investment starting with very low budget like 100 euro per share. You can buy shares of artworks or artworks collections. Raise funds from a syndicate of investors using your art collection as collateral. Invest in fine art in the most transparent and efficient way.

Access the monart online platform and browse professionally vetted and curated artworks. Compare historical prices and performance against market benchmarks. The monart platform makes it possible to build and manage a liquid portfolio of art-backed instruments, thereby eliminating the costs associated with investing in physical art.

Artworks remain in the hands of trusted institutions, vetted collectors, and celebrated galleries. Investments are fully protected by insurance and a strong legal framework. Provenance documentation is protected by cryptography, thus making it impossible to falsify once it is on the platform.

Through increased liquidity, lowering transaction costs, and added transparency, technology driven businesses such as monart have a clear potential to support the emergence of Art & Finance.


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January 20th, 2020|