Investing in Contemporary Art

There continues to be a growing interest from art buyers about incorporating art into their investment portfolios.  The art market is filled with consultants, data providers, wealth managers and lawyers who advise clients on how to utilize fine art as an asset class.  Here's a look at a few fundamental principals of how to approach investing in fine. 

Diversification
Investing in art is a great alternative to reduce risk exposure to your investment portfolio.  It is a one of kind investment because its value traditionally yields a limited depreciation.  The Art market has been shown to outperform the S&P 500 and more conservative long-term investments. The prerequisite to investing in art is to acquire top-quality art for long-term ownership of 10 years or longer.

Economic Downturn
In a recession, traditionally investors begin to look towards alternative investments such as art. This is due to a decrease in equities and real estate property investments which lack strong returns.  Research proves quality art has the ability to survive an economic downturn because the value of art holdings never decrease to zero, compared to more traditional investments.

Capital appreciation
This benefit attracts investors who want to achieve long-term growth that will survive inflation and possibly outperform the stock market.  An ever-increasing demand for art due to globalization, rising incomes and extensive information on the art market, are all factors fueling this upward trend.

Corporate Taxation Benefit
Those seeking capital gains rather than income, art in a corporate environment can be written-off over time as an expense.

It is important to note that most people who have made money from art did not make it by purchasing art as an investment.  The key to a great investment is the combination of knowledge, diversification and a passion for art.