How to Invest in Art in 2024: A Beginner's Guide

As an investor, one way to diversify your portfolio and increase your overall returns is to look into alternative asset classes. If you’re like me, you may wonder what you can invest in outside of the stock market and real estate.

Art is an alternative asset class that has the potential to provide you with returns on your investment.

However, investing in art takes a little time to understand, and you must know the resources that will help you do it in the smartest way. Checkout everything you must know about investing in art for beginners.

How to invest in art

Investing in art basically consists of buying a piece of artwork, holding onto it, and then selling it for what you hope is a higher price down the road. The idea is to find art that has the potential to increase in value over time so you can sell it later, just like when you learned how to invest in stocks or real estate.

It can feel a little daunting when trying to get into art investing, mainly because we often think of “blue chip” art — and how expensive it is. Blue chip art represents the type of art that has already shown its high value in the market. Think well-known works of art like those by Jackson Pollock or Pablo Picasso.

Certain works and artists have already proved their staying power. For example, according to Sotheby’s, Andy Warhol is still the top contemporary artist with his art valuing $1.13 billion from 2018-2022 with 136 lots sold.

If you can get your hands on an authentic piece, you could potentially see dramatic returns. Some of the fine art investing with big recent sales include:

• Jean-Michel Basquiat: Untitled, 1982, which sold for $110.5 million in May 2017
• Andy Warhol: Silver Car Crash (Double Disaster) sold for $105 million in November 2013
• Banksy: Game Changer, which sold for $23 million in March 2021
• Picasso: Les femmes d’Alger (Version ‘O’), which sold for $179.4 million in May 2015

In fact, art can provide competitive potential returns, as we saw with the annualized return of 8.3% from 1985 to 2020. Things have slowed slightly since the pandemic, despite a 4% per year decrease in annual art sales.

However, even with blue chip art, the value depends on the market, including demand. The market can be volatile, especially with more recent artworks. The value of a piece of art depends on an artist’s reputation, demand for that artist’s work, the economy, and other factors.

It’s also important to note that art is a long-term investment. When you buy art, it’s not usually to flip it a few months later. Instead, you should hold onto it for a few years. Plus, art is also illiquid, meaning that it’s difficult to convert to cash. When investing in art, you must be prepared to have your money tied up until you can find a buyer willing to pay what you want.

Types of art you can invest in

There are many strange things to invest in, including art. While we often think of paintings when it comes to art investing, the reality is you can also invest in photos, sculptures, street art, and just about anything else. You can invest in contemporary art as well as older pieces and prints of famous artwork as well as the original works themselves.

Depending on the notoriety of the piece and the reputation of the artist, almost anything can be seen as an investment:

• A photograph by Ansel Adams sold for nearly $1 million in December of 2020.
• In 2019, a piece of performance art in the form of a banana duct taped to a wall sold for $120,000.
• Once Upon a Time in Shaolin, a one-of-a-kind album released by Wu-Tang Clan, was sold to a private buyer for more than $2 million in July of 2021.

Today, with the rise of digital assets, it’s even possible to invest in digital art. A non-fungible token (NFT) allows you to own unique digital art in the form of images, video clips, and music. Beeple, a famous digital artist, routinely sees prices in the millions for his artwork, with Everydays - The First 5000 days, selling for $69 million in March 2021.

How to get started buying art

There are both primary and secondary markets for art. A primary market for art is when you purchase directly from the artist, or sometimes from a gallery. I suggest leaving this for people who have a true appreciation and knowledge about art. The primary market is the first time a piece of art has been sold. After an item has been sold once, it enters the secondary market. Anything after that first sale is considered secondary.

Here are some ways to buy art.

Auction houses

Auction houses are typically secondary markets. Usually, auction houses sell artwork that someone owns and wants to sell to make a profit. Again, this is something I would leave for those who truly understand and have a passion for art. Auction houses exist both in-person and online. Two of the most well-known and high-end auction houses are Sotheby’s and Christie’s.

However, there are online auction houses like Artfinder and Society6 that can also provide you with access to artwork, particularly if you’re looking for something a little less well-known.

When investing in art, it’s important to understand that the price the item sells for, known as the hammer price, isn’t the only cost. When you buy art at auction, you also pay a buyer’s premium in many cases. At places like Sotheby’s and Christie’s this can be as much as 30% of the hammer price. If you want to become an art investor, then be prepared for that sticker shock.

Art galleries

Art galleries offer the chance to see a variety of pieces. Many galleries do some of the heavy lifting when it comes to determining whether something might be valuable. However, you must still do your homework to decide if the piece has potential beyond something to hang in your home.

Many art galleries are primary markets because they display pieces that haven’t been sold in the past. Depending on where you live, you might be able to find good local galleries.

Art fairs

If you’re interested in buying directly from the artist, attending an art fair can be a way to do that. However, there are some prestigious fairs where the artist might not be present.

Some of the more well-known art fairs include:

• The Armory Show in New York
• TEFAF New York
• TEFAF Maastricht
• Art Toronto
• Frieze London
• ARCOMadrid
• La Biennale Paris
• Melbourne Art Fair
• India Art Fair
• ArtBo in Bogata, Colombia
• Contemporary Istanbul
• Art Dubai

These fairs can be good places to find upcoming artists, but at the same time, as with all art investing for beginners, it’s important to do your homework. While prestigious art fairs curate works likely to rise in value, there’s no guarantee, and any piece of art may increase or decrease in value.

You can also go to local and regional art fairs to see works by smaller artists. While these artists might not become huge, you might be able to find hidden gems that look good on your wall and could potentially sell for a little more later.

NFT marketplaces

If you’re more interested in digital art, you can follow good artists and buy interesting NFTs by checking out an NFT marketplace. In addition to being able to buy individual pieces, some platforms offer NFT “drops” that amount to digital packs of artwork, some of which could turn out to be valuable.

Some NFT marketplaces to consider include:

• SuperRare
• Nifty Gateway
• MakersPlace
• KnownOrigin
• OpenSea
• Rarible

Many of these platforms take credit cards, although you can also pay using cryptocurrency.

A shortcut for investing in art for beginners

If you want to learn how to invest in art, and you’re a beginner without a lot of capital, one of the easiest ways to start is to buy fractional shares. With fractional investing, you actually buy interest in a piece of artwork. This is a great option to get your feet wet as you learn more about art.

Here’s how it works:

• A platform buys a piece of artwork
• You purchase “shares” of that item
• You are entitled to a percentage of the proceeds when the artwork sells

This is considered a secondary market because the artwork has already been sold before.

Using a platform to invest in fractional artwork is the most accessible and affordable way for a beginner to get started for several reasons:

• Someone else has done a lot of the homework and evaluation for you
• You don’t have to buy an entire piece of expensive blue chip art (You invest what you can afford or the amount that makes the most sense for your investment portfolio)
• The investment may be liquid if you work with a platform that allows you to trade or sell shares

Two platforms that offer fractional art investing are Public and Masterworks. These platforms allow the option to get access to art without having to spend millions of dollars. However, investing in art this way still has risks. It’s a good idea to read the reviews before moving forward.

Pros and cons of investing in art

Is buying art a smart investment for you?

Before beginning art investing, I suggest asking yourself the following questions:

• Do you already enjoy art? If you already like art and enjoy it, you’re more likely to know something about it. Or, if you don’t know much about it, you might be excited to learn. You’re more likely to have better results if you have some interest and knowledge — or are passionate enough to learn.
• Do you already have a well-diversified portfolio and can tolerate committing a small amount of it to a riskier alternative investment? Because art is an alternative investment and can be volatile in some cases, it might make sense to invest only if you have already diversified your portfolio. The money you risk with art investing should be money you can afford to lose or to have locked up in an illiquid investment for several years. Anytime you decide to invest in alternative assets, it’s a good idea to have the rest of your portfolio in less risky assets.
• Do you have a plan for the artwork? It’s also a good idea to have a plan for the artwork. When do you want to try to sell it? If you can’t sell it, would you be happy to own it for a long time?

Understanding the risks is important before you learn to invest in art, especially since you might not get back what you paid for the piece.

FAQs

Bottom line

Investing in art carries some level of risk, just like any other investment. While it’s possible to make money in the long term with art investing, it’s not guaranteed. You must be ready to take losses if things don’t turn out how you hope.

However, it might be for you if you love art and can appreciate the aesthetics and history. This is especially true if you carefully spend your money and are selective about what you buy.