Art Investment: Is Art the Next Growth Asset Class?

There are two conflicting goals at play in every financial portfolio: growth potential and safety.

On the one hand, you want high-growth assets such as stocks in order to help the portfolio grow over both the short and long terms. But on the other, you also want to simultaneously balance those high-growth assets with “safer” holdings like bonds and even cash to protect the principal in the case of a downturn.

It’s all about organizing your investment holdings as part of a greater whole, rather than piecemeal. It’s about structuring your portfolio in a way that stands the best chance of meeting your goals within your acceptable level of risk. And it’s about finding a balance that works for you as an investor.

This is all particularly important in times of economic uncertainty. While it’s impossible to predict exactly what will happen in the future, it’s clear that right now the story of the market is one of uncertainty.

For instance, at the start of 2019, a Wall Street Journal survey found that the change of a recession in the next 12 months was at its highest level in seven years, with 25% of the economists surveyed predicting a downturn.

But that changed by the spring, with the International Monetary Fund declaring in April 2019 that these fears of a recession were overblown and the global economy is more likely to grow into 2020.


Want free money?

  • Aspiration: Want to get spotted a $150 for free? Simply sign up for Aspiration, and the free banking app will give you cash for free, you just relax while it gives you $150 just for opening a new debit card. There’s no catch. This bank account is legit and only takes two minutes to sign up for an account.

For investors, this all proves that we still don’t know what we don’t know.

Rise of the alternative assets

This also makes it a great time to look into alternative investments like private equity funds, commodities, hedge funds, collectibles and more.

These asset classes are typically not correlated to the broader markets, meaning they’re protected from the wild swings of the stock market and are better able to deliver positive returns in the event of a downturn.

The truth is, over the past 20 years alternative investments have outperformed more traditional asset classes like stocks and bonds. In fact, since 1999, an alternative portfolio has generated slightly higher long-term returns than equities, fixed income or a traditional 60%/40% split of the two, according to Invesco. At the same time, alternatives were much less risky than the other options.

For this reason, alternative investments are becoming increasingly important as tools for everyday investors to grow their investment returns while simultaneously protecting their portfolios.

And these assets can be quite powerful. Yale University famously committed a large portion of its endowment to alternative investments in the 1980s and has to-date seen industry-beating results. In 2014, for instance, Yale’s endowment posted returns greater than 20%.

Art, the ultimate alternative asset

What about art?

The fact is, art is the ultimate alternative investment, as it is completely non-correlated to the public markets and has delivered consistent positive returns over the decades. This even applies during downturns. While the S&P declined by 5.1% in 2018, the art market returned 10.6% and was called “the best investment of 2018” by the Wall Street Journal.

In some regard, buying a work of art by a particular artist is akin to buying stock in a company, where blue-chip artists and companies share two key attributes: high-quality and assured liquidity. But there’s a marked difference in performance.

Want free money?

  • Robinhood is a free investing app for your phone. I really mean free all around – free to join and they don’t charge any fees to buy or sell the stock. You can get a share of stock like Apple, Ford, or Sprint for free when you join through this link. The value of the free share may be anywhere between $2.50 and $500 and fluctuates based on market movements. You’ve got nothing to lose.

Comparing the ArtPrice100, an index which considers at the most important artists selling at auction, to the S&P 500 over the last 18 years, the art side has actually outperformed the stock market by an astounding 250%!

Think about what’s happened in that time. The dot-com bubble, the 9/11 tragedy and it’s market impact, the 2008 financial crisis… art weathered it all as a growth asset.

Why?

In part, it’s due to a supply that will never meet demand. So-called “investment grade” art, which carries six-to-eight-digit price tags and has a deep collector base, is very predictable — the artists in this category are often household names, attract a wide array of collectors, and typically have a track record of achieving high, if not record-breaking, auction sales.

And they aren’t making any more of it. Da Vinci and Picasso haven’t been producing any new works for a while, and they never will again. That fact only helps to further drive up demand and prices.

Art may not be the first asset class most investors think of when considering stock market alternatives, but it may well be the most reliable and lucrative over the long haul.

Want to learn how to invest in art? Masterworks is the first company to allow investors to buy shares of great masterpieces by artists like Picasso, Monet, and Warhol, similar to the way investors purchase shares in public companies.

Compare Your Personal Finance Options

ImageDescriptionGo
aspirationThis Company Will Give You $150 for Opening a Free Account
  • Boost your savings and earn up to 1.00% APY interest on your savings
  • Get up to 10% cash back on your purchases
  • Get $150 bonus when you spend your first $1,000 with your new Aspiration Plus Card
Learn More
personal capitalThe Smart and Free Way to Manage Your Money
  • Take control of your finances with the perfect union of technology and highly personalized service
  • Get access to free online financial tools, including retirement planner, investment checkup, net worth calculator and more
  • Digital-first wealth management advisor with 24,000 clients in 50 states
Learn More
personal capitalGet Up $500 in Free Stock for Joining
  • Commission-free stock, ETF and options trades
  • Get a free stock worth up $500 when joining (must complete application)
  • Simple, easy to use investor platform with no account minimums
Learn More
personal capitalThe First and Only Interest Earning Crypto Account
  • Receive up to $250 Bitcoin bonus when you make qualifying deposits over the first 30 days
  • Receive up to 8.6% annually on your crypto
  • Join the most trusted financial services for crypto investors on the market
Learn More
sofiAll-In-One Investing That's Easy to Use
  • Invest in stocks, ETFs, crypto, or automated investing in all one app
  • No commissions for stocks and ETFs
  • Complimentary access to SoFi Financial Planners
Learn More
blooom401K and IRA Management
  • Start your free 401k and IRA management now
  • Find and reduce hidden fees
  • Improve your diversification
Learn More
citEnjoy the Benefits of a CIT Bank Money Market Account
  • A CIT Bank Money Market Account helps you get more from your savings with interest rates for maximum growth
  • Earn over 7x the national average with high-interest rates
  • It now pays to open a money market account with CIT Bank
Learn More
Finance Blog Staff
Finance Blog is here to show you your finance options! FinanceBlog.co is a website dedicated to providing personal finance advice for real people. We take great pride in showing readers unique financial options they otherwise would not have known about. Our primary goal is to make finance simple, for everyone. We recommend for all of our users to use the free Personal Capital app to manage their cash flow and net worth.
Do NOT follow this link or you will be banned from the site!