Many people have never given much thought to investing in art, since art collection has long been considered a luxurious indulgence reserved for the wealthiest of the wealthy. In fact, misconceptions like those often dissuade people—even those with sufficient financial means, knowledge and passion for art—from ever taking on the project of investing in art pieces in the first place.
At The Art Dome, we believe that everyone should be able to experience the joy that comes with art collection and investment. But we also know that these two topics, and investment in particular, can cause confusion among those who have never been immersed in the world of fine art. So, in this blog post, we’ll go over the top reasons why we recommend investing in art pieces, and hopefully answer some of your questions in the process.
Potential for dramatic appreciation in value
As with any good investment, works of art hold the potential to soar in value over time. Savvy collectors dive deep into the world of fine art to detect upcoming trends and artists whose work is gaining recognition among museum curators and other members of artistic institutions. If they manage to snag an art piece just before an artist turns into a household name, they stand to make impressive profits.
Even if the author of a work of art has already passed away, art history demonstrates that their reputation can (and often does) keep evolving over time, potentially causing the value of their art pieces to increase. Works that are later associated with pivotal moments in art history become highly sought after and, naturally, that's reflected in their price.
For example, think about the piece Four Marilyns (1962) by Andy Warhol. This work of art, which paid homage to the Hollywood icon shortly after her untimely passing, was sold in the early 1990s for less than one million dollars. Although Warhol died in 1987, the indelible mark he made on contemporary art has only become more apparent since then, and in 2015 the art piece was sold for $36 million.
Diversification is a fundamental principle of investment strategy that can help mitigate risk and maximize potential returns. Traditional diversification options include investing in real estate and buying stocks in companies across a range of different industries. But since the value of art pieces has a low correlation to other kinds of assets, fine art offers a unique and compelling opportunity to broaden your investment horizons.
Independence from traditional financial markets means that the value of art pieces can increase even during periods of economic downturn or recession. This level of insulation from market volatility is bound to bring you more stability in your portfolio and, subsequently, greater peace of mind.
There is an added benefit to investing in something that’s independent from stocks: for most collectors, keeping up with the cultural trends and artistic movements that influence the value of different pieces on the fine art market is more interesting than crunching numbers on Fortune 500 companies. Doing investment research can actually be a fun and enriching experience.
Another related reason you may choose to invest in art pieces is to hedge against inflation. As you probably know, inflation rates in the US have spiked in the last couple of years, reaching a high of over 9% in 2022. In other words, it’s not a good time to keep your assets in cash. Buying fine art can be an effective remedy against depreciating savings.
One last piece of advice regarding portfolio diversification: if you really want a diverse portfolio, you may consider not only buying fine art, but also including a range of different artists, styles, genres and mediums within your collection. That way you’re not putting all your eggs in one basket, so to speak, in case the artist you had high hopes for doesn’t ever reach mainstream success.
Cultural value and enjoyment
We certainly couldn’t leave this important aspect of fine art investment off the list! If you choose to keep art pieces in your home, they will make the space feel like your own in a way that few other objects can. Fine art that you connect with emotionally has the ability to move, inspire and energize you, day after day. Plus, it will spark enriching conversation every time you have guests over.
When you participate in the art market by investing in works of art, you’re also contributing to the preservation of cultural heritage. Not only are you keeping the art piece in good physical condition, but you’re also keeping the artistic tradition embodied in the work alive by giving it a treasured space in your home and inviting friends and family to engage with it whenever they visit.