If you’ve been investing at all – and really, even if you haven’t — it’s likely you’ve heard about the popularity of the art market, which until not too long ago was, perception-wise, at least, limited to institutions and the ultra-rich.
Even now, there’s no shortage of headlines announcing that so-and-so paid hundreds of millions of dollars for some painting or other artwork at a renowned auction house such as Sotheby’s.
For several years now, though, word has gotten around that art is more accessible than most people may think, and that investing in art can be a good way to diversify one’s portfolio or generate secondary income.
Such investments can also protect against inflation and are not dependent on the stock market and, further, can generate solid returns. Their popularity is why, in the last 20 years or so, art has performed better than the S&P 500, returning more than 360%.
Of course, all investments carry risk, and that’s true here as well. But there are ways to affordably enter the market that mitigates such risk. One of those ways is called fractional ownership. But does fractional ownership of art make sense? Yes, but let us discuss.
What is Fractional Investing?
With this kind of investment, rather than purchasing a work of art outright, you buy shares of it, with each share representing a percentage of total ownership. If the owner profits from a sale of the artwork, the shares you hold the rise in value commensurately.
What are the Benefits of Fractional Ownership?
Let’s say this upfront: if you invest in shares of art, no, you will not be able to hang the piece on your wall, or position that vase on your credenza, to show off to your friends. But that’s okay because you can still buy and display great art or any art that you like.
However, with fractional investment, you do still have ownership bragging rights, but you also get to invest in art and make money, to boot.
Fractional ownership also allows you to own at least a piece of art that you likely wouldn’t be able to purchase on your own, making art generally more accessible.
And because of fractional investing platforms such as Yieldstreet, there’s more transparency in terms of pricing, provenance, traceability, tracking, and otherwise.
And as we say, the volatility of the stock market has prompted scores of investors to shake up their portfolios by adding art, which the market doesn’t directly affect, and which also provides a shield against inflation, a benefit that is particularly relevant today.
Yet another advantage of fractional ownership is that all fractional owners share the costs of maintaining the artwork, meaning that you aren’t solely responsible.
What’s more, not only does fractional art ownership benefit the investors, but it helps artists and industry professionals as well.
How? Galleries and museums can raise funds without needing to borrow money to buy new artworks. Rather, they can sell shares of works they already own, which frees cash that can be used to enhance current collections, and ultimately, artists or estates.
In that vein, fractional investing allows artists to basically crowd-fund their works and prospectively increase value through trading and word of mouth.
So, yes, coming full circle, fractional ownership in art does make sense, especially if you use an alternative investment platform such as Yieldstreet, which offers fractional ownership of a diversified collection of artworks by mid-career as well as blue-chip artists.
Oh, and you only need $10,000 as an entry point for adding art to your portfolio.