Its a common perception that investing in art is a gaudy endeavor, and not a serious opportunity to grow wealth. However, if you enjoy art, New York-based investment banker Alex Fieldcamp believes it can be
a lucrative way to diversify your investment portfolio. It is hard to ignore the potential of an estimated $65.1 billion industry, as estimated by UBS. The advent of fractional investing in art means the global art market is no longer exclusive to the ultra-wealthy.
Fractional Ownership in Art
Fractional investing in art allows you to own a small percentage of a work of art, explains Alex Fieldcamp. Historically, art investments could only be purchased as entire pieces and the art market lacked consistent access to liquidity. In recent years, platforms such as Masterworks and Yieldstreet have introduced fractional investing and made the art market significantly more accessible.
Art investments can now be viewed more as an asset class as opposed to a way to show off ones wealth. Fractional ownership in art is a relatively low-cost way to diversify a portfolio, certainly compared to traditional methods of art purchases. According to Citi Private Bank, the long-term correlation between art and the S&P 500 is only .12, which is remarkably low.
Doing the Research
It is not enough to simply love art, says Alex Fieldcamp
. If you want to succeed in art investments, you need to understand the market and be willing to expand your purchases to works you dont personally find appealing. Before you start indiscriminately investing in pieces, take time to do your research.
Make it a habit to keep up with activity in the global art market, such as reading trend reports and auction news. Alex Fieldcamp also recommends that you speak with art specialists and curators to better understand trends in what is selling well and why. Adding fractional works of art to your portfolio has the potential to diversify your holdings if you approach it with the same calculated measures you use in managing the rest of your investments.
Understanding the Risks
It is best to consider art investing as a long-term strategy to bolster your portfolios long-term potential. Diversify your art collection in the same way you would the rest of your investments, investing in pieces from a range of artists in various styles and across periods. Furthermore, Alex Fieldcamp says you should
be diligent and track your art investments in the same way you track stocks or bonds.
As with any form of investment, buying and selling art comes with inherent risk. Before you jump in, educate yourself on the downside of art investments. According to Alex Fieldcamp, you should not view it as a means for making a quick return, expecting to invest in a piece and immediately turn it around for a profit. It may take years before your initial investment pays off.