Is it Safe to Invest $10K in Art?

November 16, 2021

Art is one of, if not the, oldest commodities in the world, and being that it’s currently rated as a 1.7 trillion dollar asset class, it’s safe to say that it’s still an incredibly relevant segment of the investment market.

Historically speaking, fine art has been more of a plaything for the ultra-wealthy, with astronomical prices keeping the average investor and art enthusiast at the gates of the auction houses, but thanks in part to platforms like Masterworks, that’s all changing.

By splitting great works of art into discrete shares, newer investors can get in on the action and diversify their portfolios with some amazing pieces. However, just because you can do something doesn’t always mean that you should. Let’s take a closer look at the art market and whether a $10K investment is a safe move.

Why Should You Invest $10K in Art

Art isn’t the average, run-of-the-mill investment, so you might be hesitant to throw your hat in the ring initially. However, there are a number of very promising aspects of the art market that may just give you the confidence boost you need to get involved.

Art as an Independence Market

One of the biggest advantages of art as an investment is that it’s a non-correlated asset class, completely dislocated from the central trading markets, meaning that it is unaffected by the rollercoaster turbulence that ravages typical business stocks and shares.

This staunch independence is what makes art a truly fantastic option if you’re hungry to diversify your portfolio, as it’s unaffected by the possible market downtowns of other sectors.

Market Growth

Even though there’s a massive disparity between art at the top of the market and art that falls towards the bottom, as a whole, art as an asset class appreciated by nearly 4% a year between 1957 and 2007.

Now, that may not seem like a lot, but, as long as you invest wisely, it does signify a strong and stable investment. Besides, 4% is significantly larger than the interest rates of most savings accounts, so although the macroscopic figures of the art market are quite modest, you still stand to see a significant return on your investment.

Art as a Physical Asset

People have been let down time and time again by “intangible” stocks in traditional business markets, so we’re seeing a massive trend towards tangible assets such as art.

It’s true that not many people understand the true meaning of the art they’re investing in, but they almost always have a better grasp on its general form, quality, and value than the ephemeral stocks and shares that make up the bulk of their portfolio.

The Personal Side of Art

Art may be a shrewd investment, but it’s also a lot more satisfying from a personal perspective. It can resonate on an aesthetic and emotional level, which isn’t true of shares in a company.

Are There Any Risks to Know About Before Investing in Art?

To a certain extent, investing is always a gamble, and investing in art is no different, so here are a few points to keep in mind when deciding what to do with that $10K of yours.

Market Turbulence

Art may be free from the soaring highs and plummeting lows of the stock market, but it exists itself in a pretty changeable ecosystem. Works by certain artists fall in and out of favor all the time, and the trends are constantly evolving.

Dominated by the Uber Wealthy

As we’ve already touched upon, the art market is dominated by the ultra-rich, as traditionally, they’re the only members of society who could afford to enter the sector. This can be intimidating for smaller investors looking to diversify their portfolios.

You Don’t Get to Enjoy the Art

You may think that a certain piece of art would look great hung on your living room wall, but here’s the thing… If you really want to maximize return on your investment, art needs to be kept hidden in a protective box complete with humidity detectors. You may own it, but acting like you don’t will optimize profits upon resale.

Awareness of the Market

If you’re not sure what constitutes good or popular art, the chances of you making a return are fairly low. You need to have a strong grasp of which kinds of pieces are both popular now and which will continue to increase in value.

Big Wins Are Rare

A few years back, you may have heard about the painting of Christ bought at auction for $45 in the 60s that sold in 2017 for $450,000,000. Previously thought to be a work of one of his followers, it turns out that this painting was in fact a work by Leonardo da Vinci.

This is the pipe dream of any art investor, but it’s important to understand that this is akin to winning the lottery, and it’s very unlikely that buying up incredibly cheap art at auction will reap such huge rewards.

How Masterworks Makes Investing in Art Safe

If you’re feeling a little shaken by that last section, don’t worry. Masterworks addresses almost all the downsides of investing in art, making it a safer financial move for all who wish to get involved.

Universalizing Art Investment

By splitting art into discrete shares (figuratively speaking), Masterworks removes the most significant obstacle facing a broad range of investors, which is, of course, the price. Now if you have around $8K, you’re perfectly able to invest in some world-class art, so $10K, is a strong figure for your initial offering.

Lending Expertise

Okay, but what about the volatility of the market and the fact that people may know very little about the commercial side of art? Well, Scott Lynn, founder and CEO of Masterworks, is a world-recognized collector of contemporary abstract expressionist art, and many people on his team have over a decade of experience in either business economics or art economics.

It’s the Masterworks team that curates the art offered up to investors, meaning all their expertise is automatically available to you as soon as you arrive at their platform. It acts almost as a guarantee that whatever piece you end up investing in has the best possible chance of showing a return.

With the burden of knowledge lifted from you, you’re free to invest your $10K with your heart and choose a piece that you really love.

How to Make Investing in Art Even Safer

Whether you’re thinking about investing in a piece of art because it really speaks to you, or you simply see it as a great addition to your portfolio, it’s always useful to treat it as if it’s any other investment.

In other words, you should never just go in blind; research is your best friend. Even if you know very little about art from a technical or commercial standpoint, you can learn a lot by visiting museums, especially contemporary ones, and examining the sort of art that’s getting attention.

Doing plenty of research online from reputable resources will help a great deal too, and if you happen to have an art savant in your life, consult them about a piece before you invest.

If you’re worried about overpaying for artwork, check out previous sale prices online, or, if you’re in the area, visit an auction house that has managed the sale of the piece in the past. Staff will be happy to help you out with some historical sales figures.

Combine your own research with the expertise of the Masterworks team, and a decent return on your $10K investment is all but guaranteed!

Masterworks is a fintech company democratizing the art market. Our investors are able to fractionally invest in $1mn+ works of art by some of the world's most famous and sought-after artists.