Providing your portfolio with long-term growth potential and a unique form of diversification
Contemporary art is a unique and intriguing asset class in investments. Its vibrant colours, innovative techniques, and thought-provoking themes make it more than just aesthetically pleasing. It can also be a wise financial investment, providing your portfolio with long-term growth potential and a unique form of diversification.
Artworks are often considered stores of value. Like gold or other precious metals, art isn’t likely to be quickly “flipped” into cash. Instead, it’s usually held onto for years or even decades, allowing its value to appreciate over time. Art is less correlated to the stock market, providing a buffer during economic uncertainty.
For example, contemporary art has been shown to provide an average return of 7.5% per year since 1985[1]. This rivals the returns of bonds, a traditional “safe” investment.
Here are some reasons why contemporary art can be an excellent long-term investment.
Holds Value Over Time
One of the main reasons why art is a good investment is because it holds its value over time. Unlike stocks or other investments, art does not tend to go up and down in value based on market fluctuations. Instead, the value of art generally increases over time, making it a reliable long-term investment.
For example, Jean-Michel Basquiat, a well-known contemporary artist who emerged in the late 20th century, has seen his works consistently appreciate in value even after his untimely death[2]. His piece “Untitled” was sold for a record-breaking $110.5 million at an auction in 2017[2], demonstrating the potential return on investment in contemporary art.
Diversification
Investing in contemporary art also provides an opportunity for portfolio diversification. It’s a tangible asset that doesn’t directly correlate with the stock market so that it can offer stability during periods of economic uncertainty.
Christopher Wool, another highly regarded contemporary artist, is an excellent example. Despite market downturns and recessions, Wool’s works have consistently held their value and even appreciated[3].
Cultural value
In addition to its financial benefits, contemporary art carries cultural value. Investing in art supports living artists and contributes to the preservation of culture. This can bring a sense of personal satisfaction not typically found in other forms of investing.
David Hockney, for instance, is a contemporary artist whose work has provided financial returns for investors and contributed significantly to the cultural landscape[4].
Potential for high returns
While investing in contemporary art does come with risks, the potential for high returns is also considerable. For example, Peter Doig’s works have fetched astronomical prices at auction, with his painting “Swamped” selling for $25.9 million in 2015[3].
Contemporary art can be a highly rewarding long-term investment when approached with knowledge and insight. It offers a unique combination of financial rewards, cultural enrichment, personal satisfaction, and benefits beyond financial returns.
The joy of owning a beautiful piece of art, the thrill of discovering a new artist, and the satisfaction of contributing to the cultural landscape are all part of the appeal.
Ultimately, contemporary art presents an attractive investment opportunity for those seeking long-term growth potential and portfolio diversification. While it’s not without risks, the financial and personal returns can be significant.
Remember, investing in art should not just be about potential financial return. It’s also about owning and appreciating a piece of work that you love.
Do you want to curate an inspiring art collection with your own art adviser?
To discuss how Zurani Advisory can assist with your art curation requirements and investment opportunities, please email our expert team at contact@zurani.com or telephone at +971 58 593 5523.
Source data:
[1] https://www.cnbc.com/2019/12/07/art-has-showed-long-term-returns-that-rival-bonds.html
[2] https://magazine.artland.com/30-popular-contemporary-artists-2/
[3] https://www.riseart.com/article/2574/the-10-highest-ranking-contemporary-artists
[4] https://blog.artsper.com/en/a-closer-look/10-contemporary-artists-you-should-know/
THIS ARTICLE DOES NOT CONSTITUTE FINANCIAL, TAX OR LEGAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH. TAX TREATMENT DEPENDS ON THE INDIVIDUAL CIRCUMSTANCES OF EACH CLIENT AND MAY BE SUBJECT TO CHANGE IN THE FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE.
