This Asset Class Has Outpaced the S&P 500 for 25 Years

The performance of any asset class varies wildly from one year to the next. So usually, it’s not ideal to benchmark assets based on one year’s performance. However, 25 years beating the S&P 500 is no small task. Here’s what investors of alternative assets need to know about contemporary art. 

The S&P 500 vs. contemporary art 

From 1995 to 2020, the S&P 500 returned an average of 9.9% per year. Meanwhile, contemporary art returned an average of 14.3% per year during the same period. That’s nearly 5% per year during a period of great transitions and world-changing events.

Source: Unsplash

Accessibility in the art space 

The fine art space is competitive, but it’s becoming more accessible. Benzinga.com reports how modern art is becoming a more inclusive space:

The competition for valuable works of art has traditionally been limited to an elite circle of ultra-wealthy individuals and institutions. However, the global art market is becoming more inclusive since one of the world’s largest art buyers is allowing individuals to invest in some of the most highly sought after works on the market.

Benzinga

Exclusive art auctions with sky-high prices still exist, but the exclusivity of artwork is finally starting to fall by the wayside. This means that more people can finally participate in investing in art. This also means demand for art may be driving higher prices.

How to invest in art
Source: Unsplash

How can the average person invest in art? 

If you don’t have millions of dollars lying around, or large blank walls to display your pieces, can you still invest in quality contemporary art? Absolutely! There are a few options for investing in art without owning the entire piece. 

One avenue is to use the online platforms, such as Masterworks, to purchase shares of artwork. 

Masterworks purchases a piece of artwork that it believes is likely to increase in value. Then, it sells shares of that artwork to retail investors for a fractional cost.

Buying fractional shares of art is a great way for investors to diversify their portfolio, while limiting the risk of physical damage, storage, or forking out a ton of money for individual pieces. 

Artwork investments in the NFT landscape

One last point to touch on is how artwork investments have become a major part of the non-fungible token (NFT) landscape in recent years. 

Take the example of the $69.3 million dollars that a single investor paid for the NFT known as “The first 5,000 days.” This piece of art was created by an artist known as Beeple, and it is actually a collection of 5,000 pieces of work that they put together. It was one piece per day for a total of 5,000 days (that’s over 13.5 years!) to create this masterpiece.

Source: Unsplash

Now, it is fair to say that the vast majority of NFTs will not collect anything close to that kind of price tag, but there are some artists who are making a nice bit of extra money for themselves by creating NFTs that are selling for impressive prices. 

Managing your art as an investment  

For those who own physical art, proper maintenance and preservation is essential to holding your art as an investment that will appreciate in value. Different types of art requires different types of storage and preservation. It’s important to research how different elements such as sunlight, temperature, and more affect the preservation of your art over time. 

For those investing in contemporary art via online platforms, buying NFTs, and even those looking to sell physical works eventually, it’s important to keep track of the value of your art just like you would a stock. While tracking art is a bit more complicated than the value of a stock, it can be done. Auctioneers, appraisers, and even online research platforms can give you an estimate of your art’s value over time. 

Using alternative investment management platforms, such as AltExchange, allows you to manage, track, and report all your alternatives, including art, in one singular platform. To get started tracking your art investments with AltExchange for free (up to $1 million in assets tracked) get started here.

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