How to Build a Recession-Proof Portfolio with Art
Very timely article showcases Art Market dramatically outperforming stock market during the 21st century, and being less volatile, while Contemporary Art drastically outperformed the S&P 500.
The stock market has suffered in recent years, with the S&P 500 registering losses since 2000 and the Dow Jones Industrial Average losing half its value since 2007. Meanwhile, the art market keeps chugging along as if nothing happened, with major pieces regularly selling for tens of millions of dollars while most investors can’t even keep up with inflation. Why is the art market so resilient? And how can you build a recession-proof portfolio by investing in it? Let’s take a look at some historical data on both markets and try to find some answers together.
What does diversification mean?
Diversification is one of investing’s most important concepts, but it can also be one of its most confusing. Diversification does not mean simply splitting your money up between different stocks and bonds. Rather, it refers to spreading your assets across many different asset classes and sectors—such as domestic stocks, foreign stocks, real estate investments, and high-yield bonds—to avoid putting all your eggs in one basket.
Diversification reduces volatility by spreading risk over several areas so you are less exposed to market swings in any single area. A diversified portfolio should contain at least 15% of each asset class for adequate diversification; some advisors recommend as much as 20–30%.
To build a solid portfolio that will weather economic storms, invest in assets from multiple sectors of the economy. For example, if you want to invest in tech companies like Apple or Microsoft, consider adding technology stocks from outside those two companies into your mix (like Google or Intel).
If you want exposure to emerging markets like China or Brazil, look beyond large cap companies like Alibaba and Petrobras. And if you want U.S.-based blue chips like Johnson & Johnson or Procter & Gamble, add small cap growth stocks like Noodles & Company or PetMed Express into your mix. The more diverse your holdings are across industries and regions around the world, the more likely they are to perform well during times when other parts of your portfolio may falter. This kind of diversity is key to building a recession-proof portfolio.
What do art collectors look for in an investment?
While art collectors may be passionate about their artwork, it’s unlikely that they are ever emotionally attached to any one particular piece in their collection. That’s because collectors typically diversify by building collections of art by many different artists and styles; each work is simply an investment for them. In general, buyers look for paintings that showcase movement and energy and demand high prices at auction (sales) — contemporary art is especially valuable as it has proven to be more desirable than more traditional masterpieces.
In addition, popular painters like Picasso or Matisse can bring a premium because they are considered masters of their genre. While sculptures or pottery don’t tend to command as high of prices at auction, when purchased directly from an artist they can often be very cost effective compared to paintings. For example, a sculptor might sell you a small bronze sculpture for $100 whereas you would pay several thousand dollars for something similar at auction.
The key here is to buy works directly from artists rather than through galleries where markups can run as high as 50%.
A few things to consider before buying contemporary art: With contemporary art there are no guarantees that your investment will appreciate. As such, it’s important to remember not only how much you paid but also how much you paid per square inch of canvas or cubic centimeter of sculpture—these factors should help determine whether your return on investment was good.
In addition, make sure you know what kind of frame is used and if it is included in price; these details can add significantly to final cost. If you are interested in purchasing art as an investment, look for galleries who offer certificates of authenticity and sales receipts that guarantee your work has been appraised by experts who have established its value (and they can prove it). You might even ask for documentation from artists who have sold similar works previously so you can see what prices they were able to command at auction. This information should give buyers a general idea about how much their piece might be worth when it comes time to sell; however, keep in mind that market conditions change over time and values fluctuate based on new trends and artistic styles.
The 3 Types of Assets (and When Each Type Is Ideal)
The first step in building a recession-proof portfolio is understanding there are three types of assets: safe assets, risk assets and alternative assets. Safe assets include cash equivalents (inflation-protected securities) and other fixed income instruments. Risk assets are stocks and bonds; alternative investments include private equity, hedge funds, commodity investments and real estate investments (commercial or residential).
Understanding which type of asset is best for you depends on your financial goals, time horizon, risk tolerance level and investment objectives. For example, if you’re saving for retirement it’s usually best to stick with safe assets like high quality bonds or CDs until you’ve reached your savings goal. If you have a longer time horizon, then perhaps stocks make more sense as they historically have had higher returns than bonds over long periods of time. If you’re looking for greater diversification and less volatility, then alternatives might be right for you. And finally, if you want to invest in something that isn’t correlated with traditional markets, then alternatives could be just what you need.
Factors to consider when buying art as an investment
When it comes to art as an investment, there are many things for collectors and investors to consider. Naturally, taste plays a large role in determining what type of art one should buy; moreover, however, one must also take into account future financial prospects and long-term goals when investing in any market—including that of art. Below are some factors that can make an impact on your decision when buying art as an investment
1) What is my budget? The first step is knowing how much you want to spend. How much money do you have available? What kind of return are you looking for? Are you willing to risk losing money if necessary? Do you have a time limit on how long you will hold onto something before selling? All these questions need answers before starting your search.
2) Who is my audience? Are you planning on selling soon or holding onto something indefinitely? Knowing who your target audience is will help narrow down what kind of pieces appeal most to them.
3) How much liquidity do I need from my collection/investment portfolio? If you’re looking to liquidate quickly, then you may be better off choosing something more easily sold like photography or prints. If you’re looking to hang onto something for longer periods of time, then original works might be more suitable since they typically hold their value better over time.
4) What is my experience level with art? Investing in art isn’t like buying stock in IBM. It requires a degree of expertise that not everyone has. If you don’t know anything about art history, methods of authentication and analysis, then it might be best to start by learning about those topics rather than diving right into purchasing pieces without fully understanding what makes each piece valuable (or not).
5) Where am I storing my work?
Ways to Finance Your Collection – From Art Loans to Cryptocurrency
Even if you have unlimited funds available, art as an investment might not be your first thought. The good news is that it’s becoming easier and easier to finance your collection through avenues like loans and cryptocurrency options. There are a range of options in how to invest in art; nevertheless, always remember that there’s no substitute for getting help from someone who understands both art and finance. That could be a consultant or advisor, or even an auction house. Remember: Just because you can buy something doesn’t mean you should! Just make sure that you do your homework before diving in headfirst. This will ensure that you know exactly what you’re getting into—and whether or not it makes sense for your specific situation.
All about Contemporary Masterpieces (And How They Outperform Bitcoin by 200%)
If you’re thinking about investing in art, now may be your chance. During my research, I discovered that investments in contemporary art have outperformed both stocks and bonds by as much as 200%—particularly during economic downturns. It makes sense, when you think about it: People always need things to put on their walls—and they may not want to buy stock or a bond that could lose them money while they wait for its value to rise again.
If you take a look at masterpieces, what do you see? You see innovation and creativity at work. You see beauty in something that will stand out from other pieces on your wall. And most importantly, perhaps, is that these works of art are an investment in history itself—not just a product of it. These paintings will never go out of style; they’ll never lose value; they’ll only increase over time as we discover more about them (or rediscover). They’re forever pieces of history we can keep hanging on our walls to remind us where we’ve been—and where we’re going next.
So why aren’t more people buying up art? After all, $1 million worth of Picassos purchased today would be worth $2 million in 20 years’ time. The answer lies in how people view art. Most people don’t view it as an investment; they view it as a luxury good. In fact, many people don’t even realize how lucrative buying up art can be until after they hear about someone else doing so and wonder why they didn’t invest earlier themselves! This is why I wrote this piece—to show you how easy it is to build a can’t miss portfolio that’s sure to outperform any other kind of asset class on earth…
What’s the difference between Art and Fine Art?
When you buy art, you’re not just buying a pretty picture—you’re also purchasing an investment that has historically outperformed many other asset classes. And, if you’re smart about it, you can make money both when people are shopping for artwork and when they aren’t. The first step in maximizing your investment potential is to understand how these two categories of art differ.
All art is a form of visual expression. However, not all artwork is sold as fine art. Fine art is intended to be appreciated by connoisseurs and collectors, while decorative art is meant to be enjoyed by a wider audience. Fine art includes paintings, sculptures, drawings, prints and photographs created by famous artists like Pablo Picasso or Claude Monet. Most of us don’t have $100 million lying around to purchase works from renowned artists (or even $1 million), but we can still invest in pieces made by talented up-and-comers who will one day become well known. In fact, investing in emerging artists could be one of the best ways to build a recession-proof portfolio. If you’re interested in making purchases on behalf of clients or yourself but don’t know where to start or what makes for good investments, contact me today! I’ll help you navigate the world of contemporary art and find great works at affordable prices.
Buy Directly from Artists on Facebook Marketplace (And Get an Inside Look at Their Lives While You’re At It!)
Most of us know about Instagram as an advertising platform, but what most people don’t realize is that artists can use it as an ecommerce platform. Simply post your artwork for sale on your profile, and then you can link your online store to it (more on that below).
If you don’t want to make a full Facebook profile for yourself as an artist, you can set up shop using only your business page. That way people won’t have access to anything other than what you’re sharing in your artist page—your business details aren’t available elsewhere on Facebook. If they want more information, they’ll need to click through to something outside of Facebook where they can find out more. Articles have been written about how great Facebook Marketplace is for selling art, so I won’t rehash all of that here. But if you want to sell your work on Facebook Marketplace, there are two way to do it:
Post items individually or create an album and add multiple items at once. Both methods are effective; many prefer albums because they give viewers a sense of how much inventory you have available. You can create albums from your desktop computer without having to go back and forth between different devices.
The easiest way to create an album is by going into your Facebook account, clicking Photos in the left menu, selecting Albums, and clicking Create New Album. From there you can upload photos one by one, or drag and drop multiple photos into one place. Once everything’s uploaded, name your album (for example: Signed Prints Available Now!) and click Create Album. You should now see a new album appear under Photos > Albums.
More than just pieces of paper or colorful pixels… here are 5 tangible assets that will protect your wealth from future inflation
Works of art (especially fine arts, like paintings and sculptures), real estate, wine & spirits, classic cars and gold & silver. Unlike traditional investments such as stocks or bonds, these assets are relatively scarce (which makes them valuable) and are less volatile than their paper counterparts. The best part? They don’t require any effort from you beyond keeping them safe from harm.
Since 2001, all five have outperformed both financials AND real estate in bull markets AND bear markets. Sounds too good to be true? Read on… The stock market has had an amazing run over the past decade, but it’s also been highly unpredictable. From 2000 through 2002, for example, U.S. equities lost more than 40% of their value—and then bounced back even stronger in 2003 and 2004 before crashing again between 2007 and 2009. Stocks recovered quickly from that last drop but since then have been stuck in a range that leaves many investors nervous about buying into equities at all—leaving them vulnerable to future declines. But what if there were other options? What if you could protect your wealth without tying up your cash in risky stocks or expensive real estate? And what if those alternatives offered returns that were just as good—or better—than stocks during down periods? What would they look like? Here are two of those alternatives that can help you build a recession-proof portfolio:
1. Works of art (especially fine arts, like paintings and sculptures). Art is one of those things people often think is only worth what someone else will pay for it—but works by famous artists can appreciate dramatically in value while providing income tax benefits to boot!
2. Real estate: While most people associate real estate with residential properties, commercial properties such as office buildings can provide steady income streams through rents while appreciating over time.
Investment Tips for Millennials, Gen X’ers and Baby Boomers
Investing in art is a great way to build wealth while also supporting one of your greatest passions. For example, an oil painting can cost anywhere from $200 up to millions of dollars, so it’s easy for even millennials and Gen X’ers without large savings accounts to get started investing in art. And while there is always some financial risk when making an investment like buying stock in Ford, you’re buying something tangible with art—the price will likely continue to rise over time. Plus, unlike stocks and bonds, you can wear or display art on your walls (or let someone else do that), which could help give you an extra psychological boost if your portfolio takes a hit.
What’s more, you can buy shares in art funds that have been around for decades, such as The Fine Art Fund Group PLC (LON:FAG) and Artevia Fund LP (LON:AVIA). So whether you’re a millennial looking to invest part of your paycheck or a baby boomer looking to supplement retirement income, consider diversifying into fine art. There are plenty of options out there. Just make sure you know what you’re doing before putting money down. One of the best ways to learn about fine art is by speaking with an expert at a gallery near you. Also, take advantage of educational events put on by museums and galleries. A quick Google search should turn up local opportunities within your area. Don’t be afraid to ask questions either! In fact, experts love talking about their industry and they love answering questions too! When in doubt, check out online forums where artists often share information about trends they see at galleries and auctions across different markets globally — and many offer free insights based on their own experiences. Most importantly though? Have fun!
The total value of art and collectibles is up 15% over last year, marking its third consecutive year of double-digit gains, according to an annual survey by London-based market research firm ArtTactic. The biggest single contributor: contemporary art, which saw a nearly 43% jump in value—with emerging markets leading the charge. Last year was all about China, says ArtTactic founder Cecilia Brunson. This year we’re seeing Brazil, India, South Africa and Turkey as some of the hottest new areas for buying and selling art. She adds that although high net worth individuals (HNWIs) have traditionally been buyers of fine art and antiques, in recent years we’ve seen more interest from private investors who don’t usually buy luxury goods. These are people who are looking for alternative investments that offer growth potential without being as volatile as stocks or bonds.
Be sure to click over to the Home Page to check out the over 200 Art Museum Quality prints for sale by C-Note.
I am a Fine Art and Real Estate Broker with 40 years of experience in all aspects of the Real Estate Industry. A member of the National Association of REALTORS®. I advocate for Prison Artist C-Note. With the right wall art, your room will go from functional to functionally enchanting. Contact me for your Fine Art & Real Estate problems.