If you love art and appreciate or even understand art, then investing in art is a good use. But if you don’t like art itself, other investment options will suit you better. If you’re afraid of taking risks in the art of investing, here are five great options you can start.
Most art collectors and some investors invest in art, and they like to convert art into an investment and diversify art. You also don’t need to be a collector to start investing in art, you can put that investment in one or two pieces. But if you want to pick valuable art, understanding the art world and working with people who have art knowledge is the key to investing.
Why do people invest in art?
As the cultural heritage of human beings, artworks also signify the changes of the times. Among them, the market value of artworks can reflect its uniqueness and unrepeatability, and inherit the times. In the past 10 years, it is unimaginable that the value of art has exceeded financial assets, real estate, company stocks. Even the 8.5% return of global stock markets.
Investing in art has good prospects for everyone. At present, the average annual return on art is 16.5%, because it has a high rate of return, huge room for appreciation and not much risk.
5 Ways to Invest in Art
Some people who invest in art think it is a good way to invest, while others are just pure love of art. No matter which category you fall into, you have the following options for investing in art.
Anyone can make art into NFT and sell it on the NFT marketplace. If you want to be a collector of digital art and have exclusive rights to use it or get royalties from digital art used by others, you can buy NFTs to guarantee your ownership.
You can think of NFTs as a traditional art collection and art investment or a speculative game. The price of creative work is subjective and depends on many factors. For example, the reputation of the artist, the history of the art, the unique style of the art or the price collectors are willing to pay, etc.
The biggest difference between NFT art and traditional art is that if you want, you can display the value of art through the online market. Therefore, compared with traditional artworks, NFTs can determine art assets with high frequency, while traditional art can only be displayed through exhibitions or collected for many years, and the value of artworks cannot be determined.
How NFT Investing works？
Step 1: Research Available NFTs
Some things that you want to confirm about the NFT include:
- The team behind it: you want a reputable team that helps drive the value of the NFT up.
- Whether it is on-chain or off-chain: Off-chain uses centralized servers that could lead to the image being lost if the server goes down.
Step 2: Select A Brokerage or Exchange To Purchase Crypto
- Cryptocurrency Brokerage: either a firm or individual acting as the middleman to facilitate buying and selling of cryptocurrencies
- Exchange: an online platform where buyers and sellers trade with each other based on current market conditions.
Step 3: Select a Marketplace to Purchase Your NFT
NFT marketplace will either sell the item for a flat rate or it will hold an auction for the token.
Popular marketplaces include: OpenSea, Larva Labs, NBA Top Shot Marketplace, Rarible, Crypto Wallets.
When the NFT is purchased, it is stored in a crypto wallet on the same blockchain, on a different blockchain, or in decentralized storage. Because the NFT is digital, you can only display it on a screen, often as part of a website. While you own the NFT, in most cases you don’t own the copyright on the original asset (the NFT creator does), meaning you can’t reproduce it, and you can’t sue someone for copyright infringement.
Examples of crypto storage wallets for NFTs include: Cybavo, Trust Wallet, Alpha Wallet, MetaMask.
Are NFTs a good investment?
NFTs are still new to the marketplace and many experts are unsure of exactly how good of an investment they are. While they leverage blockchain technology, it is unknown as to whether or not the NFT will retain its value over time. Investors should proceed with caution.
How do NFTs gain value?
The value is based on four primary factors:
- Utility: how it is used such as a token used in gaming
- Ownership history: play a role if the token is created by a famous person or brand name
- Future value: involves the speculation of where the NFT will move over time
- Liquidity premium: how much demand there is for the art with NFTs with higher traffic yielding higher premiums
Can you turn NFTs into cash?
An NFT can be sold in the marketplace for cash or cryptocurrency. All transactions are recorded on the blockchain, securing the right of ownership of the NFT. Savvy investors are buying NFTs that they believe will appreciate in the future to then sell them at a marketplace for a profit.
This company was established in 2017. A masterwork is a great form of investment as well as an option, especially for those who are new to investing in art. Because masterwork is convenient and can do a lot of work for you. Investors can be kept up-to-date when works are purchased and shares are sold to investors.
In masterwork, you don’t have an actual work of art. However, the authenticity of a high-value work of art that you have purchased with other investors and has been reviewed by experts is guaranteed. You can enjoy relationships and connections with other investment partners. There is no minimum investment amount limit in masterwork, but the specific investment amount depends on the work you invest in.
3. Invest in an art fund
Art funds are similar to Masterworks, where each person in a group owns a little bit of the piece of art. Mutual funds tend to be more exclusive in terms of starting price; minimum buy-in may start anywhere from $2,500 to upward of $1 million.
But art funds generally come with more control and greater return potential than traditional investing. The Fine Art Fund Group says it provided a 9% return before fees.
But at least one private fund, the Artemundi Global Fund, has found a workaround by allowing investors to take turns displaying the artwork in their homes.
4. Collect Art
If you want to buy and collect a piece of art, you can pass it on to your family or children. When you’re shopping for a piece of art, whether you’re in a gallery, art fair or online. There are a few things you can do ahead of time to make sure this is a worthwhile investment. You can research from artists, art as well as dealers. Once you start owning the artwork, you can maintain or even appreciate the value of the artwork and insure it. But if it is a very old art, you may have to invest in restoration to extend the life of the art to increase the price and better preservation.
5. Sell Art
Many people who buy paintings don’t end up selling them later on, and that fact can skew pricing samples for art. When a painting is auctioned, it’s often because the owner of the work thinks the piece will attract a handsome price.
If you want to sell a piece of art, you can first evaluate and verify the authenticity of the artist’s signature. And go to the public viewing auction price. Once you know the market price for the artwork along with the artist’s signature and some sales fees, you can then plan how to grow its artistic value next.
How to Invest in Art with Caution
Before investing in art you want to make sure you have enough money. Most people don’t put all their money into investing in art because it may not provide a certain amount of profit for other stable jobs. You also have to think deeply about the type of art you want to invest in and how much you plan to pay up front to invest in it.
Here are some tips for prudent investing in art：
- Diversify your investments: Make sure that investing in art is only part of your investment and that you can get enough advice from people who understand art.
- Research often: You can regularly research some artists to learn about their artwork and even market prices.
- Be patient and realistic: Investing in art is a long-term investment not a get-rich-quick method. You need to be patient and wait.
- Buying works from living artists: like works by well-known and reputable artists, we do not recommend buying as it will cost you a lot up front. You can start with young and promising artists whose work may have low prices but become more and more valuable over time.
If you’re new to the art of investing, keep these tips in mind.
Is investing in art risky?
Every investment has risks but the risk of investing in art is relatively small. Art is non-illiquid and has certain cycles. This means it can be difficult to turn your investment into cash quickly. The true value of the artwork is also difficult to determine, and if you really want to sell it, you still need to evaluate and find an auction house. But it’s possible that you end up investing a lot of money in art and it’s hard to buy it when you want to sell it.