When it comes to investment opportunities, the choice between stocks and art often arises. Both options have their merits and allure, but I don’t think investors necessarily need to choose between the two. So whenever anyone asks “Is it better to invest in stocks or art?”, I tell them that you should be diversified across both asset classes.
The benefits of investing in stocks doesn’t need to be repeated here. Years of data prove that over the long term, stocks are a fantastic investment. Basically everyone should have some of their wealth tied up in stocks. On the other hand, art is a unique alternative asset, that is fit for more adventurous investors, but when approached with knowledge and careful attention, it can serve as a valuable complement to a well-diversified portfolio. Importantly, because the price of art and stocks are affected by different economic events/conditions, investing in art can provide a hedge against volatility or a downturn in the stock market.
Because I don’t believe that investors should have to choose between stocks or art, the real question that needs to be answered is; to what extent should you be invested in both?
While I am a proponent of art investing, it is, of course, advisable to have a greater percentage of one’s net worth in traditional investments like stocks rather than art. I won’t speak exactly to how much of your net worth should be tied up in stocks, but for millennials, Gen Zs, and Gen Ys, it is generally the bulk of one’s wealth, in addition to bonds, real estate, and other traditional investment vehicles. Even though art can be an exciting and potentially lucrative investment, it is better to view it as an alternative or satellite investment rather than a primary investment vehicle. Limiting your total net worth in art to 10% to 15% is considered prudent. Although, this value should be determined on a case by case basis, according to the investing goals of each person.
Can you Buy Art like Stocks?
If you are looking for art investments that behave similarly to stocks, Masterworks and Yieldstreet offer art funds, fractional ownership schemes, and professional management that can mimic stock market vehicles like ETFs.
These platforms help you bypass the need for extensive knowledge and the continuous monitoring typically required to maintain an art collection. In the case of Masterworks, it has a market place that allow you to enter and exist investments with a similar ease to that offered with stocks.
If you would rather have a hands-on art investing experience, might I recommend Easel Investing’s guides, which can help you navigate some of the complexities of the art world and art investing. Developing an understanding of the art market, artists, styles, and historical context is essential for making informed investment decisions, even if you are only devoting 10-20 percent of your net worth to the asset. We also have a Watch List comprised of artworks from Blue chip artists to get you started in collecting, with prices from less than US$200.