Did you know the art industry is worth roughly $1.7 trillion?
This means that art investment can be incredibly lucrative. With the rise of NFTs and digital art too, the market has more to offer than ever before.
If you're considering investing in art but want to better understand the benefits of doing so, then this article is for you.
This article will discuss the advantages of investing in both physical and digital art. By the end, you will have a clearer picture as to why art is a worthwhile investment.
Here are 5 reasons why art investment is worth it in 2021.
When taking out a loan, many banks will ask you to provide something as collateral. Typically people put their house up, but this incurs interest rates of 6-9%. For art, banks will usually only charge 2-5% for high-wealth clients.
Taking out a loan can be a good alternative to selling your art. And it can help you to avoid large capital-gains tax and selling fees. The money from the loan can then be used to buy more art.
With more art, there is potential to raise more cash and increase portfolio diversification.
Money from art loans is often used for investments and business expansion. This can generate more than enough cash to pay off the loan and gain a strong profit.
When buying art, you're also buying a piece of culture and history. You will have been drawn to specific pieces for your own reasons. Whether they be aesthetic enjoyment or potential for future trading.
Whatever the case, you may have formed an emotional attachment to your art and no longer wish to sell it. Art loans can help with this. They allow you to keep your prized possession and enjoy the money fine art brings.
With art loan interest rates sitting relatively low in 2021, it's a great time to invest in art. You may be able to both appreciate it and raise a healthy income.
A major reason to invest in art is its disconnect from other assets. This means that stock markets do not affect the value of your art. If there's a stock market crash, your investment won't be hurt.
Art investment exists in its own space, with its own economy. As a result, it trades on its own supply and demand.
If an artist dies, for example, their art becomes more scarce. This lowers supply and increases demand.
This means that your art can keep its value regardless of external economic factors.
As a result, investing in art is a great way to diversify your investment portfolio. Its asset separation means that you're more likely to keep your portfolios wealth, even during stressful economic times.
In 2018, art investment was the top asset class. It outperformed, gold, real estate, and the S&P 500. Now, when diversifying portfolios, 88% of fund managers recommend investing in art.
Diversifying your portfolio with art also gives a source of liquidity. It used to be the case that art was considered illiquid. Meaning that it was difficult to sell your art for a healthy price.
Now, thanks to digital art, this is changing. NFTs (non-fungible tokens) give investors access to online marketplaces and gallery's where they can easily buy and sell art.
This means that if you're looking to diversify your portfolio with art, NFTs may be the way to go. They will provide your portfolio with greater liquidity and thus, investment security.
Art being separate from other assets also means it can be a great long-term investment. It can be used as a steady form of wealth over a long period of time. This is thanks to its physical tangibility.
However, when buying art as a long-term investment, there are several factors to be considered first. This includes the artist themselves. If you invest in an artist with a bad public image, you could find your artwork's value changing.
You should also take note of the materials made to create the art. If they are of low quality, the art could easily be damaged. It could also naturally deteriorate over time.
This would not make for a good long-term investment. So when making a long-term art investment, make sure to research the artist and the materials used. This will help to ensure you make a reliable, steady investment.
Earning passive income is easier than ever before. One way of generative passive income many people may not think of is through lending art. This makes art a great investment in 2021.
The only downside is, it may only be an option for people with a high net worth.
Once you've purchased a piece of art, you don't have to wait for its value to appreciate before making some money. Many museums and auction houses will pay to host your artwork.
Lending your artwork to museums and auction houses means that it will be seen by more people. If it's an in-demand piece of work or enjoyed by viewers, its value could increase.
This means that lending your artwork can increase your potential income two-fold. Firstly, it can generate a healthy passive income. And secondly, it means your artwork could sell for more when the time comes.
Like using art as collateral, lending your artwork also gives you the opportunity to generate income without having to sell your work. Meaning you have more reason to keep your most beloved pieces.
Moreover, lending your artwork can allow you to network and create more contacts within the industry. This can increase your scope for potential buyers and sellers.
Before lending your artwork to a museum or auction house, there are several things to first consider.
Firstly, you should ensure a comprehensive loan agreement is drawn out. This will ensure you are paid adequately and determines several other financial factors.
Secondly, you should consider the location of the museum or auction house. If it is far away, you could risk damaging your art during shipping. Ensuring the right transportation is arranged is important.
Thirdly, you should be sure the correct insurance is taken out on the art. This can be paid by the borrower and should be outlined in the loan agreement.
One great reason for art investment in 2021 is the rise of NFTs. NFT sales have hit heights of $2.5 billion this year alone. Compared to last year's sales of $13.7 million, this is an exponential growth.
The high growth rate of digital art investment is likely due to its accessibility. Although many NFT marketplaces report average sales of between $3,500 - $5,800, most sell for less than $200.
Even at the higher end of NFT prices, they still come in at a much lower price than physical artwork. The work of emerging artists is typically priced between $10,000 - $15,000 for physical art.
This means that investing in digital art brings far less risk than physical art. Even if your NFTs don't appreciate, you're not likely to lose a huge amount of money.
If you're interested in investing in art for the first time, NFTs can be a good place to start. It's especially great for people already interested in cryptocurrency and technology investment. Digital art can be a brilliant way to learn the ins and outs of buying and selling art.
NFTs are based on the Etherium blockchain network. If you already have a knowledge of Etherium, then getting involved with NFTs is an easy process.
The first step to investing in digital art is finding yourself a reliable NFT platform.
If you decide to invest in digital art over physical art, then you can be certain of its security. Digital art NFTs run on a decentralized blockchain network. This means that they function much like cryptocurrency.
The data that makes up your artwork is stored on nodes hosted across the world. These nodes contain an identical record of your arts dataset. This means that no matter what happens, there will always be a record of your NFTs data and its ownership.
Whether a network goes down or a file becomes corrupt, blockchain ensures your digital artwork is secure.
NFTs also come with a set of unchangeable metadata. This means your art cannot be altered or stolen. So if you're a particularly cautious buyer, NFTs could be for you.
After reading through this article, you should now understand the benefits of art investment in 2021.
Whether you're a high-net-worth individual or simply someone with a love for art, there's a reason for you to get involved.
One of the best places to start is with digital art. At Two Two we have a team of art lovers working hard to create an interactive digital art experience. Our gallery is the first of its kind.
If you're interested in investing in digital art contact us today and let us know how we can help.
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