In today’s unpredictable world, with financial markets swaying under the weight of global uncertainty, finding smart investment strategies can feel like navigating a storm. Stocks are often volatile, and traditional options don’t always offer the stability or returns investors hope for. That’s where alternative investments can make a difference.
As an alternative to mainstream investments, such as stock or bonds, these assets do not follow the same market cycles and, as a result, can help investors diversify their investment portfolio and ride out uncertain investment markets.
Over the last decade, art has become one of the more popular alternative investments. It offers investors a way to diversify a portfolio while potentially safeguarding against market turmoil.
While artwork can be highly illiquid — and it doesn’t generate income — the historical appreciation of this asset is impressive.
For instance, over the past several decades, the annualized returns of the S&P/TSX Composite Index (TSX:OSPTX), the de facto benchmark for the Canadian stock market, were between 6% and 9%. In this same time period, fine art investments provided annualized returns between 6% and 10%, depending on the quality, era, and type of art.
Unfortunately, investing in artwork can be complicated. There are different eras and styles to consider and when you consider that only 1% of artists generate the bulk of work bought and sold for investment purposes, and deciding what artist to include as part of your portfolio can be a daunting experience.
Thankfully, there are plenty of established and emerging artists with strong track records for investors to consider. Even better, investors can now rely on the expertise of art investment platforms, such as Masterworks, to authenticate, insure and store the art piece, before finding the ideal time to sell and earn a profit on the art piece.
To help, here is a quick guide on how to find relevant and profitable artists to add to your investment portfolio.
Modern vs contemporary art investing
When looking for potential artists to invest in, one easy way to begin your search is to compare contemporary and modern artists.
Despite the name, modern art refers to artwork created from the 1880s up until the 1970s. Contemporary art refers to artwork created after the 1970s, up until the present day. That means many well-known, famous modern art pieces were created by artists who have now passed away, while many contemporary art pieces were created by artists who are still alive.
That said, neither the contemporary nor modern art period is better for investors. Instead, focus on finding opportunities to invest in established modern artists, such as Picasso or Pollock, or emerging artists with a solid history of building a following and a reputation, such as Banksy.
To help, here are six artists to help in your quest to build a solid fine art investment portfolio.
6 of the best artists to invest in today
Here are 6 of the best artists to invest in right now based on their popularity and the historical price trends for their art pieces.
Banksy
When it comes to contemporary artists, Banksy is perhaps one of the most well-known. The street artwork from this anonymous graffiti artist has taken social media by storm, with pieces like “Girl with Balloon” being immediately recognizable.
The anonymity surrounding Banksy is part of what makes this artist so alluring, as well as his often cheeky political commentary. But Banksy isn’t just a social media sensation. Pieces like Sunflowers from Petrol Station have sold for over $14 million at Christie’s auction. And even a piece that Banksy had rigged to self-destruct at auction sold for over $1 million while stunning onlookers.
Of course, buying a Banksy outright is unrealistic for many investors due to the high entry price. However, you can still purchase shares of artwork from Banksy with a platform like Masterworks.
How to invest in art using Masterworks
With Masterworks, you can purchase fractional shares of blue-chip artwork from artists like Banksy and Monet to diversify your portfolio. Shares often start at only $20, and Masterworks generally holds artwork for three to ten years before selling a painting. Following a sale, shareholders receive distributions.
In March 2022, Masterworks sold a Banksy that it had been holding since October 2019 for US$1.5 million, which represented a 32% annualized net return.
Past performance isn’t a guarantee for future results. But if you want to invest in famous artwork from the likes of Banksy, alternative investment platforms like Masterworks make it far more accessible.
Hunt Slonem
Hunt Solnem is an American painter and sculptor born in 1951. Slonem began his career in Manhattan in the 70s, having his first solo show in 1977. His career would largely exist in New York, although his work wasn’t of skylines and bustling cities. Rather, Slonem is known for his paintings of exotic and vibrant butterflies, birds and other tropical island scenes.
According to Artsy, Slonem’s work has sold for an average of $11,000 per piece and 40% overestimate over the last 36 months.
Pablo Picasso
Pablo Picasso is another famous painter from the Modern Art period, largely known for pioneering Cubism and his later surrealist works.
This Spanish artist was born in 1881, and his career is so expansive that art collectors and historians attribute his works to different stylistic periods, like his Blue Period and Rose Periods. He also had a tremendous influence on the art world, his development of Cubism being one of many examples.
Picasso paintings are immensely valuable. One Picasso work sold for over USD$100 million in a Sotheby’s auction, making it the first painting to sell for such a high amount. But you can also find prints, ceramics, drawings and sculptures from this renowned artist through fine art auctions and private sales.
Like Banksy, the easiest way to invest in works from Picasso is to use a fractional art investing platform like Masterworks. But many of his ceramics and sculptures are sold at auction for lower starting bids, so they’re still accessible to investors who want to buy an entire work of art outright.
Loie Hollowell
Loie Hollowell is an American painter who emerged as one of the best artists to invest over the last few years. In 2016, Hollowell had her first solo show at the Feuer Mesler Gallery and shortly after that she sold several of her pieces for sums between USD$8,000 to USD$15,000. It was a pivotal moment in the emerging artist’s career.
Since then, prices for Hollowell paintings have risen by more than 1,200%. At this point, According to Artsy, a Hollowell has an average sale price of USD$519,000 over the last 36 months, which is an appreciation of 19% over initial price estimates.
Lucas Arruda
Born in 1983, Lucas Arruda is a Brazilian painter known for his semi-abstract landscapes that often feature beaches and dense forests. He’s had exhibitions around the world, including London, New York, and Paris, and his work can be found in prestigious venues including the J. Paul Getty Museum and Rubell Museum.
According to Artsy, an Arruda has sold for an average of USD$241,000 over the last 36 months, which is 61% over the anticipated value of the piece.
Arruda limits the number of paintings he sells each year, but investors can find his work through an active secondary marketplace of collectors and auction houses.
Henry Taylor
Born in 1958, Henry Taylor is an American artist most known for his depiction of African American life in America. Taylor exhibitions have been held across the world and, like Lucas Arruda, Taylor’s works can be found in museums like Rubell and the Museum of Contemporary Art in Los Angeles, CA.
According to data from Artsy, the average Taylor sold for approximately USD$298,000 over the last 36 months — a 39% increase in the original value of the work.
Risks and rewards of artwork investing
Whether you invest in established modern artists or emerging contemporary ones, it’s important to understand that artwork isn’t a guaranteed, profitable investment. However, it is a unique asset class with the potential for outsized returns that can help diversify a portfolio. If you’re considering investing in art, it’s important to consider some of the major risks and rewards:
Risks when investing in artwork
- Liquidity: Artwork is typically illiquid, meaning it’s difficult to sell quickly if you need the cash. Platforms like Masterworks have secondary marketplaces for shares that help improve liquidity, but it’s never guaranteed in the art world.
- Lack of income: Unlike investments like bonds and dividend stocks, artwork doesn’t generate income. This means you need pieces to appreciate – and by a decent margin – to make holding artwork for years a worthwhile investment.
- Volatility: Blue-chip artwork can have stable prices, but prices for emerging artwork can be more volatile. And tastes and the overall art market can change, so it’s difficult, and somewhat subjective, to predict how much a piece might be worth in a few years.
Rewards when investing in fine art
- Potential returns: According to Masterworks, contemporary artwork has outperformed the S&P 500 and real estate since 1995. This potential for outsized returns is one of the main advantages of investing in alternatives like artwork.
- Diversification: Another benefit of investing in artwork is to diversify your portfolio. This can be done with other alternatives as well, like wine or collectibles, both of which are also becoming more accessible with fractional investing platforms.
- Downside protection: Historically, artwork prices don’t correlate strongly with other asset classes or the general market. This means art can provide downside protection for a portfolio when markets are down or other asset classes dip.
Should you invest in artwork?
According to the Motley Fool, ultra-wealthy investors with a net worth of at least $30 million, alternatives make up at least 50% of total assets. But for everyday investors, alternatives only comprise about 5% of the average portfolio.
In other words, the world’s wealthiest investors are piling into alternatives like artwork, hedge funds, private equity, and cryptocurrency. But does this mean you should do the same?
Ultimately, the answer comes down to your investing goals and risk tolerance. Investing in assets like artwork can help you diversify your portfolio and gain some downside protection.
But you also give up liquidity and income generation.
If anything, you can use fractional investing platforms to begin investing in art without having to purchase paintings outright. And there’s nothing wrong with sticking with investments like stocks and ETFs if you don’t want to dabble in alternative investments whatsoever.
Bottom line
I’ve covered six potential artists worth investing in based on historical and recent auction results. But this is only scratching the surface of the number of talented artists out there. And, the art world is ever-changing; who knows what other emerging talent will captivate the world in the coming years?
If you want to regularly invest in art, it pays to keep your ear to the ground. This means attending galleries, following your favorite artists online, and keeping up to date with auction results. As trends change, you’ll hopefully be in a position to capitalize by investing in the right pieces at the right time.
— with files from Romana King
Sources
1. RBC Wealth Management: Is artwork a wise investment?
2. EDEN Gallery: Modern vs. Contemporary Art: A Comprehensive Guide (April 2019)
3. MyArtBroker: Banksy
4. Sotheby’s: Sotheby’s Gets Banksy’ed at Contemporary Art Auction in London (October 5, 2018)
5. Artsy: Hunt Slonem
6. Sotheby’s: Works by Pablo Picasso at Sotheby’s
7. Art in America: Loie Hollowell (January 27, 2017)
8. Artnet: How Newly Minted Art Market Star Loie Hollowell’s Prices Rose More Than 1,200 Percent in Just Three Years (September 15, 2019)
9. Art in America: Loie Hollowell (January 27, 2017)
10. Artsy: J. Paul Getty Museum
11. Rubell Museum: Lucas Arruda
12. Artsy: Lucas Arruda
12. Museum of Contemporary Art: Henry Taylor: B Side
13. Artsy: Henry Taylor
14. CNBC: Buy a Monet instead of a Treasury? Art has shown long-term returns that rival bonds (December 7, 2019)
15. The Motley Fool: Alternative Investments of the Ultra-Wealthy in 2024 (October 18, 2024)
This article When markets are volatile, consider alternative investments: Here are 6 artists to invest in, right now originally appeared on Money.ca
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
