When people think about building an investment portfolio, fine art isn’t the first option that comes to mind. They’re more likely to think about stocks, gold, real estate, and bitcoin.
This guide seeks to explain why fine art is a suitable contender in any investment portfolio. We’ll also look at an instance where fine art is a better investment than gold.
What is Fine Art?
Fine art is a term that traditionally refers to a type of art created to please the eye. It is the kind of art that portrays creative expression. Fine art complements the notion, “art for art’s sake,” an ideology that arose in the 19th century when artists began using art as a freedom of expression. Examples of fine art include drawings, sculptures, and paintings.
Today, fine art is not just created for aesthetic reasons. It has become “a marker for refined taste.” It has also expanded to encompass filming, photography, printmaking, and conceptual art.
The Perks of Investing in Fine Art
Fine art is attractive as an investment option for these reasons:
- “The index of broad art market prices” has zero correlation to other asset classes like bonds and stocks. That means that when the stock markets crash, the art market is mostly unaffected and vice versa. For instance, in the 2008 stock market crash, art indices remained flat to a little up. As a result, fine art is a perfect option for any investor that wants to diversify their portfolio and reduce risk.
- Fine art is not just for the wealthy. You do not need a lot of money to invest in fine art today. You can invest in art funds, security tokens backed by fine art or NFT art. Art funds pool resources from various investors and buy art. They then sell it, and each investor gets their share of the revenue. If you can’t afford the cost of joining a fund, you can consider security tokens backed by fine art. The cost of this investment is much lower, and most people can afford it. For example, investors only required US$500 to invest in MS Token, which represents a carved blue sapphire recently valued at US$150 million. On the other hand, investors can explore NFT art, which is available on various marketplaces for a wide range of price points.
- You can buy art for aesthetic reasons or because it represents a belief that’s important to you. This is a feature that’s rare in other asset classes. Case in point, investors that have bought MS Tokens love the fact that the Millennium Sapphire celebrates significant human achievements and extraordinary individuals over the last 5,000 years. The Sapphire will preserve the memories of these people and achievements for millennia to come. Besides this unique feature, investors might also find the Millennium Sapphire an attractive investment because it celebrates individuals they admire.
- Fine art is easy to move. Whether it’s in physical or digital form, you can move art from one place to another, unlike physical gold. That means that you can take your art with you during an economic crisis. However, moving gold bars or lots of cash isn’t so easy and has a added security risk. Also, art on canvas cannot set off metal detectors at security points, further proving its mobility.
- An art investment can make you good returns. 2021 was abuzz with news of an artist named Beeple that sold his NFT art for millions of dollars. On the other hand, physical paintings created by renowned artists like Leonardo da Vinci have appreciated over the years and sold for hundreds of millions of dollars. In the case of the Millennium Sapphire, investors will get potential returns from the NFT business.
Experts such as James Rickards and Michael Moses recommend that investors invest 10 to 20% of their portfolios to art. The percentage that you invest towards art varies from individual to individual. Remember, art is exceptional at diversifying your portfolio and moderating risk. So, if you have highly volatile assets in your portfolio, you could use art to lower that volatility.
MS Tokens (MSTO) is a pure art investment. Please visit Cryptosx.io to sign up.
James Richards: Art Funds, February 25, 2015.
“Art is an asset with a proven track record for preserving wealth through extreme circumstances and over long periods of time, so Rickards believes it rewards the patient investor.
“In the short term you may be involved in equities or bonds or currencies or some other category but sooner or later they tend to crash and burn. Art remains valuable through all states of the world, so it is a good asset class for part of your portfolio.”
US News, Money. April 26, 2016. Why Fine Art Can Beautify Your Portfolio, By Simon Constable
“How much art should be in a portfolio? Moses says it depends on individual circumstances, but 10 to 20 percent is reasonable.”
“The returns can be surprisingly good. The broad art market has provided compound annual returns of 5.7 percent in the last 30 years and 8.8 percent for the last 60 years, says Michael Moses, founder of consulting firm Beautiful Asset Advisors.”