What is the Best Way To Invest in Art?

December 3, 2021

When you begin to think about diversifying your portfolio, art always seems a tempting starting point. Stories of artworks selling for well past the asking price regularly make the news, and we’ve all seen the incredible amounts an old and valuable painting can go for.

But when you start to enter the art market, you’ll discover that it isn’t quite as simple as it might appear from the outside. Getting a good return on an artwork is rarely an easy process, and it can be years before you see a real profit. And that’s assuming you made a good investment in the first place.

If you’re wondering what’s the best way to invest in art, the answer isn’t exactly clear-cut. With a tricky market and some unpredictable changes, there’s rarely one best way to invest in art. In this guide, we’ll cover the best things you can do when investing in art, and why personal preference plays a big part in what art you purchase.

What are the different ways of investing in art?

To decide on the best way to invest in art, you need to understand how many ways you can invest in art. Although art investment can seem a relatively simple process, the most obvious methods of investing may not be the right choice for you.

Single ownership art investment is what most people think of when investing in art. With single ownership investment, investors pay for the outright ownership of a piece of artwork. They are then responsible for how the artwork is stored, how it’s transported, and how it’s cared for (although the owner is likely to employ an expert for these needs).

Multi-ownership, or partial ownership, is a good way for first-time investors to enter the art world. For partial ownership, a group of investors will pool their resources to purchase an artwork. This is often done via an art fund, which acquires works on behalf of investors. Partial ownership makes art investment a more liquid option compared to outright ownership. Rather than selling the artwork, an investor has to sell their share in the artwork instead.

Art investors nowadays may also want to try a modern approach to art investment: the NFT. An NFT, or non-fungible token, is essentially an artwork that only exists online. Investors entering the art market for the first time may prefer this method, because the open marketplace and easy resell methods require less money spent on middlemen. However, NFTs are subject to the same unpredictable marketplace as traditional art. As a new medium, there’s also some uncertainty about the future relevance of NFTs.

Within these types of ownership, there are different options for what to invest money in, depending on the type of profit you hope to make.

Paying a large amount of money for an artwork that’s a guaranteed seller may seem like the obvious choice, but the chances are you won’t see a huge amount of profit. This is considered low risk, high price tag.

On the other hand, you may pay out for an original by an up and coming artist, and hope the future market is profitable. This method, known as high-risk and high price tag, is a tricky method for even experienced investors.

One final option is low price tag, low risk, A good quality, limited edition print is less expensive than an original, likely to sell well, but probably won’t gain a great deal of profit over time.

So, with all of these options available, what is the best way to begin investing in art?

What is the best way to invest in art?

Perhaps the best way to invest in art is to invest in something you enjoy. Don’t rely on it solely for big returns, and do your research before making a purchase. The art market can return a high profit on an investment, but there are no guarantees.

Because it’s such an unpredictable and changeable marketplace, don’t make art your sole investment. Investing in art is a fantastic way to diversify your portfolio, but it never pays to put all your eggs in one basket.

Be prepared for a slow profit. Often, the best way to secure a profit on an artwork is to hold on to it for a while. So, don’t think you can start flipping paintings and seeing the money roll in. It’s going to take some time to really get a return.

On the bright side, while you wait (and wait) for interest to accumulate, you have something interesting to look at.

Research before buying, and start small. Don’t throw all your money at one artwork, and hope for the best. Think of how you would enter the stock market. Would you invest all your money in one company you like the sound of? Or would you slowly build up a portfolio based on a growing understanding of the market?

Is there one best way to invest in art?

There isn’t a single way to invest in art that has a guaranteed return. No matter which artwork you choose, the market can fluctuate and vary. Artists that were once popular lose their appeal. Artists maintain their appeal, but the market stagnates. And artists come out of nowhere with sudden surprise sales.

If there’s one piece of advice for all first time art investors to remember, it’s to buy art that you genuinely like. The artwork might be hanging around for a while, and if you can’t stand the sight of it, the lack of profit will only hurt. Don’t buy art you hate just because you think it might have a potential for future profit.

So, there may not be one single best way to invest in art, but there are a few solid principles everyone should follow:

  • Don’t expect a quick profit. 10 years is often seen as a minimum amount of time to hold onto an artwork. Any less than that, and you’re unlikely to see much in the way of profit (unless there’s a sudden and unexpected surge in popularity for the artist).
  • Do your research. Not just about the artist, but about the auction house, the authenticity, and the current market. Always research the origin of the artwork, especially if you think you’re getting a bargain. A fake artwork, or an artwork without corroborating authenticity, isn’t a bargain at any price. Also, check that it’s being sold legally.
  • Buy art you like. Art is a difficult market, and that’s never going to change. Even established artists who sell regularly for huge sums are not guaranteed moneymakers, because tastes and opinions are always changing. Invest in art that you like, that you’re excited to own, and that you’re willing to care for.
  • Don’t forget about what you’ve bought. When you have money tied up in an artwork, you’re unlikely to completely forget. But art can’t just be left in a room and ignored. The owner must pay for any maintenance needed, otherwise there may never be an opportunity to make a sale.

Final thoughts

There is no guaranteed “best way” to invest in art. Unfortunately, the market just doesn’t work like that. A sure-fire sale is likely to result in a smaller profit, while taking a gamble on a potential future popularity is a risk that might not pay off.

If you intend to invest in art, find a piece that you want to own, and will enjoy having for the foreseeable future. Even if there is no profit, the enjoyment of ownership is worth entering the marketplace.

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.