Lately the trend of investing in the art market has been gaining momentum, with new platforms appearing that facilitate the purchase of fractional shares. Let's explore the topic a bit.
Hi leofinance friends I hope you are doing well, in the last few years, online platforms have made the stock market, forex, cryptocurrencies and many other types of investments available to the general public, but the art market was always something exclusive to those people who have a lot of money... until now, although founded a few years ago, several platforms for buying and selling 'shares' if we can call them that, in the art world have been proliferating and becoming more and more accessible to the average citizen who has some money and wants to invest it in something stable, and with prospect of future profits.
For millennia, works of art have been something very valuable, and very exclusive, certainly, art forms such as music, crafts and others have been within reach of us of the masses since the beginning of time, but when we started talking about works of goldsmithing, sculptures, paintings of famous artists, those were part of the world of the elite.
When we imagine a 'treasure chamber' we do not only think of gold and jewels, we also visualize some works of art, so entrenched in the popular imagination.
Moreover, in times of uncertainty, or conflict, art usually demonstrates its importance, being part of stories of theft, rescue, rebellion etc ... some examples may be the famous bell of looting of works of art by Nazi Germany in the territories they conquered and if consequent attempt to hide the loot, so that then some officers tried to escape with it to ensure their future after the war. https://en.wikipedia.org/wiki/Nazi_plunder
Or the controversy surrounding the 'looting' of the Baghdad museum in 2003. https://www.sydney.edu.au/news-opinion/news/2018/04/10/iraq-museum-looting--15-years-on.html#
The monetary value and cultural importance of art should not be underestimated, and for the first reason, that some people have long decided to buy art, far from appreciating the lines in a painting or the majesty of a sculpture, the idea of some people is to invest their money in something that not only will not devalue, but over time, can greatly increase its value.
The art market in recent decades has outpaced the growth of funds such as the S&P 500.
With the arrival of the Covid pandemic, the art market underwent a deeper transformation, the restrictions meant fewer auctions, fewer galleries, and fewer markets, so it was to the online market that investors and of course, intermediaries and artists migrated.
Platforms like Masterworks or Yieldstreet already existed, but the pandemic was their moment, then with the collapse of the international shipping system, exhibitions and auctions continued to migrate to the online market, and now, with the economic uncertainty, many people are looking for low-volatile investments that pay long-term dividends.
How do these platforms work?
Explained alarmingly simply, the company, for example, masterworks, buys the artwork or exhibit, they register it with the SEC, and start trading the shares within their platform, investors, using the funds deposited with masterworks buy the shares and when the company liquidates the artwork, a process that can take anywhere from 3 to 10 years, the shareholders receive their profits if any minus the company's commissions, or, investors can trade these in a secondary market where shares are bought and sold as if they were the stock market.
Companies like masterworks have their experts to explore the art world and identify the best valuation prospects.
And while initial investments were originally $10,000 and up, today there are much cheaper options.
What to note.
The first thing is to remember all the basic rules of trading when using these services, do not invest money you are not prepared to lose, inform yourself properly etc etc....
While art can be a good asset to protect yourself in difficult times, such as war or recession, art is not immune to depreciation, and in times of EXTREME crisis can see its value drop.
Also, art has a particularity, being that it can depreciate even in good times, because art works in a certain way like currency, as an artist creates more and more productions, the net value of each individual piece can fall, because the works of that artist lose exclusivity.
As for masterworks, perhaps the most famous art broker today, it is important to stress a couple of things, while the items traded on the platform are SEC insured, the company, as such, is not. This may be a red flag.
On the other hand, there have been no lawsuits or scandals related to Masterworks and its operations since its founding in 2017.
These are all things to find out before making investments.
The shares in the art market will eventually operate like any other market, and with the times we live in, this trend will accelerate, but as with any type of investment, we must always inform ourselves properly and understand the language that is handled in such world, after all, easy money does not exist, in everything there are risks, even so, it is good to have another alternative a little more stable to diversify portfolios within everyone's reach.
Thanks for reading and happy night.
Recommended Bibliographic Reference