Fine Art

Is art a good investment in 2022?

If your goal is to diversify your portfolio with alternative assets, then art can be an excellent investment choice. Chosen wisely, an artwork can steadily increase in value over time and be a great store of wealth, especially in times of inflation and uncertainty in the economy, as the Forbes Magazine argues.

Will art be a good investment in the coming year?

Of course not all art will be a good investment in 2022. However, if you invest in an artwork by one of the top 500 artists, you are most likely to benefit from a superior price apreciation. Additionally, you should consider that art is a long-term investment that should be held for at least a few years before selling again.

With the Encrpyt Ventures investment platform, you can be sure that you are investing in authentic, high-potential artworks with an estimated average annual return of 6,5 %.

Do you need a lot of money to buy art as an investment?

The fine art market used to be accessible only to high net worth collectors and institutional investors. With Encrypt Ventures, you can now start investing in fine art from 10.000 Euro. This allows more investors to diversify their portfolio and benefit from the price developments in the art market.

What are the average returns of investing in art?

Strong historical performance has proven that the art market can deliver impressive price appreciation in the long-term. Particularly the leading Artprice 100® Index has seen an annual price appreciation rate of 8.9%, compared to 3.4% for the S&P 500.

Is art a good asset class for my investment portfolio?

Art is not automatically a good investment. Especially when buying contemporary art and purchasing from galleries and at auctions. Auction houses for example charge an average buyer’s premium of 20-25%.

Let us assume that an individual is attracted by the art market and has 10.000 Euro to invest at an auction. Out of these 10.000 Euro at least 2.000 Euro are needed to cover the buyer’s premium of the auction house. On top of that, an additional average 10% need to be taken aside for taxes, shipping and handling. As a result, the person is limited to a maximum bid of around 7.000 Euro and their investment allocation of 10.000 Euro is already burdened with a 30% depreciation at the start of the investment.

By removing the many intermediaries and the captial-intensive steps involved in traditional art buying, a financial instrument like our asset tokens also eliminate the high costs that used to make art investments almost impossible for many investors. With the asset tokens, purchasing a share of an artwork is as a fully digital and immediate process.

Without the middlemen and the fees, your actual return on invest is substantially better compared to the exemplary scenario mentioned above. Breakeven is reached early and investors profit from the annual return without having to deal with immediate depreciation of their allocation.

What are the advantages and disadvantages of investing in art?

Art can be an excellent investment choice if you are looking to diversify your portfolio with alternative assets. The advantages of investing in art include a relative lack of correlation to economic downturns and inflation, a reduced risk through diversification and a relatively stable store of value in a real asset.

On the other hand, you should not invest in art if you are looking for quick gains. Art is an asset that should be held as a mid- to long-term investment. That is why we set a minimum holding period of one year for token holdings on the Encrypt Ventures platform.

Why do 88% of wealth managers recommend investing in fine art?

Why the majority of wealth managers considers fine art attractive as an alternative investment depends on a few factors.

Firstly, art prices have shown little to no correlation to other asset classes and economic downturns. Even in the years following the 2008 financial crises, art auction results continued to rise. As a consequence, financial analysts have found that adding fine art to a diverse portfolio decreases the amount of risk.

Secondly, fine art historically outperforms other assets and stock indices like the S&P 500. While there is some volatility in the market, this depends vey much on the category of art. The best results are achieved for the top 500 artists in the world. Within that spectrum, the leading Artprice 100® Index has seen an annual price appreciation rate of 8.9%, compared to 3.4% for the S&P 500, in the past 20 years. These most sought-after artists are seeing the best price returns in the market and a growing global demand, especially in Asia. Auction results show that the profitablity rises with the value of the artworks, with the average annual return of artworks with a value over 200.000 EUR sitting between 7.6% and 8.9%. The advantages of art as investment are not only seen in direct comparison to an index, but more importantly when adding art to a portfolio. A study by Artemundi Global Fund has compared two portfolios, and found the one with fine art to have both a higher return level and a lower risk level.

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