So according to a study by Masterworks Contemporary artwork as an asset class Has beaten the stock market and most Other asset classes out there since the Year 1995. since that time contemporary Artwork has returned 13 Returns on Average each year that is compared to a 10.2 percent return from stocks and 8.9 Return from Real Estate and just a 7.2 Percent return from gold but before you Put one single dollar into artwork as an Investment watch until the end of this Video we will be covering how the value Of artwork is determined and why it's Different than any other asset class That you have owned in the past we're Also going to talk about the one and Only way that artwork can generate Returns for your Investment Portfolio We're also going to be covering factors That skew the paper returns that you see For artwork so you should be aware aware Of all of this before you jump on board With this asset class lastly this video Is not sponsored so let's start off by Defining what artwork investing is Artwork is an alternative asset class so It's different than traditional assets Out there like stocks and bonds now Artwork investing means that you're Owning a piece of artwork with this idea In mind that it will increase in value Over time and that you're going to sell It someday and make some money versus
Somebody who's just collecting artwork And that's someone who's buying it to Pretty much appreciate it in their own Collection and they're not so much Buying something from the standpoint of Making money so when you're an artwork Investor your number one priority above All else is making money not so much Collecting the pieces that you are most Interested in now for most of History Artwork has been a tangible asset which Is one of the many reasons why it has Has done especially well during this High inflationary time however we're Also going to talk briefly about nfts or Digital artwork because this pretty much Breaks away from what I just said seeing As nfts or a digital token are not a Tangible asset now in the past artwork Investing usually meant going out and Buying an entire painting yourself or Being involved in some type of exclusive Artwork investment Club but either way You were talking about tens of thousands If not hundreds of thousands of dollars In order to begin investing well thanks To technology today and a lot of Innovations in finance you are now able To buy shares of artwork with an Investment minimum starting at as low as Five hundred dollars with some different Companies now I'm sure you guys have Seen the plethora of sponsorships out There for Masterworks and also just
Social media ads all over the place so We are going to specifically look at That as well and sort of debunk that as Far as whether or not it is a legitimate Investment opportunity but anyway the Main point here is in the past it was Really difficult to access artwork as an Investment because you needed tens of Thousands if not hundreds of thousands Of dollars but now today with the Various avenues that only require a few Hundred bucks while a lot of people are Looking at artwork as an Avenue for Investment so that's why the overall Category has really grown in popularity Now perhaps the most important thing to Understand about artwork investing or Any investment in general is how that Asset makes you money and artwork is a Non-yield bearing asset so yes it is a Tangible asset unless we're talking About nfts meaning it's a real thing you Can put your hands on and physically Look at but on the other hand it's not a Yield bearing asset meaning it doesn't Pay you any money while you own on it so In this sense it's actually similar to Bitcoin or gold because it doesn't pay You any amount of money while you own it Meaning the only way to make money is Relying on What's called the greater Fool Theory or other words being asset Appreciation I think this the simplest Way to understand this is looking at
Examples of yield bearing assets since This is what most of us are familiar With so looking at dividend stocks when You buy a share of a stock like Coca-Cola for example you buy it at a Set price and then from that point in Time it can go up or it can go down but No matter what that share price does in Addition while you're owning those Shares you're also going to earn Quarterly dividends so long as Coca-Cola Continues paying them another example is Rental apartments so if you own Apartments or even a single family home For example that you rent out well now You're able to make money from that in Two different ways because first of all The underlying land and property could Go up in value and second of all you Should be earning cash flow from those Rental checks coming in every single Month so those are yield bearing assets That pay you in two different ways and So this is the important distinction to Understand if you go out there and you Make a bad decision and you buy a Dividend stock at the wrong time and Then the share price goes down in value You can still rely on the dividends to Basically bail you out and get you back Towards that break even level even with A rental property let's say you didn't Time the market well and then the market Drops 10 percent as long as your
Property is Cash flowing and if you want To hold on to it for a couple of years Maybe even a decade you're not really Going to be worried about the short term The thing with artwork is that it either Appreciates in value or it doesn't That's your only way to make money so All of your eggs are in one basket in Terms of your monetization strategy for This asset now when artwork does Appreciate in value it can be some Massive returns for example looking at This painting here called Girl With a Pearl Earring originally created in 1665 While it was purchased in 1881 for a low Price of just 27 seven dollars well Today it's worth 30 million dollars of Course that would have been a great Investment but you wouldn't even be Alive today had you been somebody who Bought it in fact probably even your Children would be you know grandparents At this point in time so seeing as most People don't have somewhere around 140 Or 150 years to wait you know artwork Isn't something where you can expect That type of insane return but Nonetheless you do need to get this idea In your head of artwork being this very Long-term investment and think about Things taking a decade if not longer for Meaningful appreciation to be realized So yes if you zoom out over many many Decades artwork returns can be really
Really high but when you look at them on A closer level you realize that these Trends happen over a long span of time Through one method which is the value of The artwork going up while you own it You don't have cash flow you don't have Dividends so just be aware of that Because you have to be extremely patient As an artwork investor so now I want to Cover how artwork is valued because it's Completely different than stocks and Real estate which you are probably more Familiar with so with stocks you can Look at quantitative data or specific Figures like earnings per share and Revenue to help you understand the Current value of a stock and then the Future projected value with real estate It's similarly valued based on Quantitative things or numbers that you Can actually look at or other factors Such as location upgrades Etc but nonetheless very easy things That you can look at and really Understand quite simply well with Artwork the value is totally subjective And what that means is that it is not Based in any way shape or form on the Utility value of that object so all all Of the examples prior here looking at Stocks in real estate those things are Being valued largely based on the Utility value that they provide to the Investor so for example if you're
Invested in a growth stock it's the Utility value of the growth potential of That company and then the future profits And revenue that that could of course Generate and then looking at real estate There's of course this utility value of Allowing other people to occupy it for a Monthly fee or you yourself can take Advantage of that utility value and live In your own real estate investment so There's not this utility value here with Artwork that you can look at in terms of Profits generated or a structure that You can reside in or allow other people To so what determines the value then Well it's going to be variables such as The visual appeal of the piece or the Subject and complexity in artwork Valuation is largely determined by an Appraisal that is performed by a Professional auction house and this Auction house market is pretty tight There's only three main ones that people Use and we'll get into what those are in A little bit but the value of artwork is Determined by these experts out there at Auction houses but understand it's based On subjective factors that are often Difficult to you know pinpoint or put Your finger on a lot of making money With artwork simply comes down to Finding the right artists who you think Will be far more popular in future Decades and then buying their artwork
Today and I know it sounds pretty simple But it is far more difficult in reality To accomplish this but in the most Simple manner that is how you value Artwork and then make money with it is In those methods now even though artwork Doesn't provide us with utility value it Clearly does have value in society in Fact it's one of the oldest asset Classes out there and and something that Has literally had value for thousands of Years so there are clearly reasons to Invest in artwork and Society has Clearly said yes artwork has value so That being said it shouldn't just be Completely written off or forgotten About so let's Now cover a few reasons Why you might want to consider adding Artwork to your portfolio so first of All diversification if you only have Money in stocks and bonds you're Susceptible to those pesky ups and downs Of the stock market and these Alternative assets are often not as Correlated or even correlated whatsoever With what the broader stock market is Doing second on the list in the past Tangible assets have proven to be Effective Hedges against inflation and So with the inflation we have seen Previously that has caused a lot of Artwork prices to increase but if we do See inflation to remain high in future Years that may also bolster artwork
Prices as well as other tangible assets Another huge benefit here is the tax Benefits with artwork similar to a 1031 Exchange in real estate you are able to Defer taxes if you sell a painting for a Profit by investing in a like kind Painting with those proceeds so you Could theoretically keep buying and Selling Whole paintings reinvesting Those profits and then never ending up Paying that tax bill to the IRS of Course we do have to mention the Bragging rights associated with this Asset class because most people just Don't own it and so there is that cool Factor that does come along with this Particular asset and so it might be Similar to like a classic car collection For example where the asset itself does Have some level of cool Factor there's Also the fact that artwork returns have Beaten the stock market in recent Decades but do keep in mind that past Results do not guarantee a similar Outcome in the future we talked about How long artwork has been generating Returns for investors and so artwork has A very long track record of generating Returns so it's pretty much the complete Opposite of something like nfts or Cryptocurrency which have a very short Window of time where they've been Generating returns for investors but as Of recently mostly a lot of losses and
Finally perhaps one of the biggest Reasons is that artwork tends to be what Is called a safe haven asset or where a Lot of money tends to go when other big Asset classes fall so during times of Stock market Corrections or crashes or Even the housing market you tend to see A lot of that money flooding into Artwork so they can be sort of a Non-correlating asset in that manner so That is the other reason to consider now As many of you already know I have a Number of different blogs out there but My career velocity about artwork Investing in general led me to start my Next blog which is all about artwork Investing so if you've enjoyed this Video so far and the information Presented you're gonna love my blog as Well because I'm actually the editor and The manager of this website and then my Only other partner helps out with the Content and we put everything together For this presentation and all of this Information so it's pretty much going to Be an extension of what you've seen here In this video so what I would recommend Doing is going over to the website which Is artwork Investor.com and then simply bookmark The website for a later date so even if You're not looking to explore this asset Class right now maybe down the road Depending on where you're at financially
Or where the markets are at if you are Ready to just learn more about it you Can revisit this blog here and not to Toot my own horn or anything but the Main reason why I made this blog is Because when I was researching artwork I Wasn't finding very much out there and So I decided to be the one to create That resource so that is essentially What we've done here so you can see some Articles we have I have one that's a Portfolio update on my investment in Masterworks so that is a really cool Article to check out we also have a 5 000 or so word guide to artwork Investing For Beginners and that may Sound like it's really long and boring But it's actually very very Informational and uh I think you'll find It to be a very interesting read so That's going to be the top link down in The description below if you want to Check out our beginner's guide to Artwork investing over on Artworkinvestor.com so let's say you Decide you want to include artwork in Your portfolio what are your options for Investing well as discussed earlier Option number one is to buy a painting Yourself or you could get involved in a Private artwork investing Club where a Small number of individuals are pooling Money together well in the past this was The only way that you could invest in
Artwork so as a result it was really a Asset class that only the hnw or the High net worth could even really get Exposure to while some our auctions do Start as low as 100 most of them are Going to be fifty thousand dollars or More for a painting that's really Investment worthy and then if you're Talking about Blue Chip contemporary Artwork you're now talking about in the Millions of dollars for an individual Painting so the option that interests Many others instead is to invest via a Platform and we're going to talk about Each of these more specifically in a Little bit but the two most popular Today that you've probably seen ads for Are Masterworks and yield Street well Innovations in fintech or financial Technology have allowed for new Investment opportunities and one of Those has been fractional ownership of Alternative Investments like outwork and One of those has been fractional Ownership of alternative Investments Like artwork so it sort of started off With fractional shares where brokerages Realized they could split shares up into Pieces and sell those pieces versus Entire shares that could be very costly And then that technology branched out Into other asset classes like farmland And wine and now artwork so think of a Painting being broken up into individual
Shares and then investors themselves Buying shares of that painting so let's Say for example you have a painting Worth two million dollars if you needed To buy it yourself you would just have To have two million dollars to put Towards that painting or let's say a Group of 10 friends that each had two Hundred thousand well let's consider Instead if you could actually break that Up into 100 000 shares at twenty dollars each and Then offer that to thousands of Investors that's pretty much what these Platforms do it's called crowdfunding um Is another word for it started off in Real estate but yes once again it has Branched out into other asset classes And then outside of buying individual Shares of artwork there are some Platforms that offer artwork as part of An investment fund which is essentially A professionally managed pool of assets And so yield Street does offer a couple Of funds that have artwork as part of The portfolio to have Diversified Exposure to different asset classes so Let's say you do want to own a painting Yourself directly your next step is to Pursue an auction house an auction house Facilitates the buying and selling of Assets and there's three types of Auctions the English the Dutch and the Sealed price auction well the
Interesting thing about artwork is that 70 of all artwork is sold through just Three auction houses so if you do want To own artwork directly yourself you're Going to end up at some some point in Time going through all three of these Auction houses number one is soda bees And they have a 32 percent market share Number two is Christie's and they did Seven billion dollars of Revenue in 2021 And then number three is Phillips which Started in London in 1796. now some of these still have Prices starting as low as one hundred Dollars so don't think that just because It's a big fancy name that it's uh you Know 100 million dollar paintings always But you will also find those on there so It can be a very wide range of prices And you will find these offered both in Person and online so let's say you don't Have a hundred thousand dollars to put Into your own painting and you want to Leverage fintech and invest with a Platform well there's pretty much three Avenues that are popular to accomplish This today and all three of these are Fintech apps number one probably the one You've heard of the mo post is Masterworks where you can buy and sell Shares of contemporary Blue Chip artwork This platform is invitation only but if You are looking to skip the wait list I Do have an affiliate link down below
That allows you to do so or the link is Ryan o scribner.com Masterworks your first investment does Require a 500 minimum but the share Price does range on the value of the Artwork but it's usually around twenty Dollars per share so what's cool about Masterworks is even with a 500 Investment you don't necessarily have to Put all of that money into one Particular piece you could spread it out Across multiple different investment Options that they offer giving you Diversification within your artwork Investment number two is yield Street And this is a platform that offers Access to many different alternative Investment offerings and the one in Particular I want to talk about is the Prism fund as this one does include Exposure to artwork so instead of going And buying individual shares of art on Masterworks this would be the equivalent Of investing in a managed portfolio of Assets where artwork is one component of That portfolio so if you want to look at The link to check out the prism fund That's going to be Ryan oscriptner.com Yieldstreet or it's also going to be Down in the description below in this Particular fund does have a two thousand Five hundred dollar minimum but do Understand that there's no direct share Purchasing with yield street so if you
Are looking to buy shares of artwork Itself directly you are not able to do That right now on yield Street and then Number three we have public I'm sure You've heard of this app before if You've watched any videos about the Stock market and they are mostly known For stock and crypto trading but Recently they acquired a company called Otis which is offering alternative Investments so now those offerings are Available right within the public app so You're able to buy shares of artwork Sneakers and even nfts so if you already Have the public app you may find that There are some artwork investments in There from time to time we also have Full reviews of all of these platforms Over on artworkinvestor.com so if you do Want to learn more about any of those be Sure to check out those review articles Now it wouldn't be a proper artwork Investing video without briefly touching On nfts since these are a form of Artwork although they are extremely Speculative while nfts are a Non-fungible token or digital artwork What's amazing to look at is just how Fast nft sales grew so in 2019 nft sales Reached 4.6 million dollars and by 2021 That figure client timed to 11.1 billion Just to put that in perspective that's 11 100 million so it went from 4.6 million
To 11 100 million in just that two-year Span so keep in mind that uh we're very Early in the nft Um adoption and it's also up in the air Whether or not these are going to have Long-term value but if you are looking To learn you know this is a really good Space I would say to learn maybe not so Much you know putting a lot of money Into because uh it's not time tested and It's not necessarily you know something That has those other quality attributes That a traditional artwork investment Has so we got to see this insane boom And bust play out but does that mean That nfts are going to go away forever Personally I think not and that's what Most experts think as well so according To the Art Market 2022 report 88 of H NW Or high net worth investors stated that They had interest in buying an nft in 2022. now bear in mind that was back When nft prices were going up and I Would love to hear what that number is Now but at that point in time a lot of Sophisticated High net worth investors Did think about potentially or had Interest in buying an nft so although Nfts are interesting it's still very Early so I would recommend you know Being extremely cautious if it's Something you are personally pursuing as An investment I would say learn about it For now and you know keep an eye on it
And see what happens you know over the Coming months as there's probably going To be better deals in the future on many Of these nft projects so let's touch More now on artwork investment returns Because I think it's important to Understand the source of that statistic That we talked about in the intro here And so let's start off with that one More time just so we can recap according To a study conducted by Masterworks from 1995 to present artwork has returned 13 Annually and that's compared to a 10.2 Percent return from stocks 8.9 from Real Estate and 7.2 percent from gold but It's important to understand that this Was a study of Contemporary Art sold After 1945 looking at all our that sold At least two times so this is really the Post-world War II liquid Art Market that They were looking at and so understand There's many paintings that did not Transact more than two times since 1945. Perhaps there's ones that people bought That just didn't appreciate in value so There was no reason for a transaction so There are reasons why artwork in general Could be skewed looking at this Particular data but on Masterworks in General they have a very defined process For vetting artwork and deciding what Contemporary artwork ends up on their Website so the types of artwork that do End up on their platform are the types
That are mentioned in this statistic but Just understand that this may not be Covering all types of artwork in the Entire world we're looking at Contemporary artwork that has sold at Least two times since 1945. lastly I Want to finish off with some of the Risks associated with investing in Artwork well first of all it is a Long-term investment I would say at Least a 3 to 10 plus year investment and It may be eLiquid in the meantime if you Buy shares on a platform like Masterworks they do have a secondary Market where you can sell them but there May be some fees incurred with cashing Out early and things of that nature so In general if you're not looking to Invest for at least three years and Probably many more it's just an asset Class that you shouldn't even consider Because there's only one way to make Make money which we now know is the Asset appreciation or greater fool Theory and that takes many many years to Play out so if you're looking for a Six-month investment this is simply not Going to be it you are locked into just That one strategy for making money and So if you buy the wrong painting and it Doesn't appreciate in value that's the Only way you could have made money from It and so at that point you just have a Painting if you do decide to buy your
Own painting you have to consider the Potential for theft or counterfeit so Keep in mind you should have these Things professionally evaluated and I Would recommend only going through a Professional auction house like the Three mentioned in this video and lastly We covered that artwork is extremely Difficult to Value because of the Subjective nature of the asset class but Anyways guys that is a basic overview of Artwork investing and I hope it sheds Some light for you on where these Returns are coming from and how some of This might not be exactly what it Appears but in general I would say Artwork is a really solid asset class And something that should be considered If you are looking to diversify outside Of stocks and bonds so once again if you Want to learn more be sure to check out My blog Artworkinvestor.com I would recommend Bookmarking it for later and at the top Of the description down below we have a Link to our full artwork investing guide Which I think you will find is a great Companion for what you just learned here In this video but thanks so much for Tuning in guys make sure you drop a like Subscribe and hit that Bell for Notifications of future uploads and as Always I hope to see you in the next Video
