Nouriel Gino Yazdinian is the CEO of NY Elizabeth, a luxury online auction house with offices in the United States and United Kingdom.
Diversifying your portfolio is one of the most advantageous things that anyone can do in order to generate revenue from long-term investments. There are many avenues that one can take to optimize their investments, and in recent years, art collection has been recognized as one solid strategy.
Consider that there are many reports out now that show the power of art collection to rival the long-term returns of bonds. This is a staggering analysis that has made art dealership an even bigger industry worldwide, and it’s one of the reasons why my organization’s clients now encompass people from all walks of life and socioeconomic backgrounds.
Investing in art goes beyond just the actual purchase and also includes art authentication to protect against fraud and researching pieces to determine their market value and baseline appreciation over time. There are two camps when it comes to art collection: buying for pleasure or buying for investment. And in my opinion, there’s a viable way to combine these mindsets to reach a balance that satisfies both agendas. Across all time periods of human history, art has easily exceeded inflation, is long regarded as an investment of passion and offers potential economic benefit.
Here are some cornerstones to art collection that should be taken into account when considering it as an investment.
It’s important to diversify your collection.
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My love for art is what brought me to this industry, and now my primary job is to procure art for clients who are open to combining their love of art collection with financial stability as they mature. Art is beautiful, yes, but it also serves the dual purpose of providing potential financial coverage. This potential economic benefit is why it’s smart to invest in a diversified collection of art as you would in the stock market.
You could invest in several types of art such as NFTs, paintings, sculptures and other luxury goods. Take into account your investment goals, artistic passions and lifestyle. For burgeoning collectors or those who are new to fine art, I advise you to consider drawings or photographs, as they tend to be less expensive than paintings or sculptures. Also, since we live in a truly digital age where no area of the world is unreachable, now’s the perfect time to research foreign artists and take advantage of the latest technology that brings artwork from all over the world conveniently to your doorstep. The attractiveness of collecting art lies in a scenario that combines personal favorites with status pieces that are viewed as a solid investment.
Art offers the power of tangibility.
As a tangible, real asset, art is by and large a commodity that most people understand. Oftentimes, investors make the mistake of investing in products they don’t understand, but art holds a rarefied position in being truly in the eye of the beholder. There are many works of art that aren’t universally adored but are worth millions, and investors in art have the added benefit of being able to see their investments on a daily basis in a way not available with stocks and bonds.
Furthermore, it isn’t necessary to be wealthy to purchase art, and it’s considered a safe haven for anyone looking for a valid refuge from inflation. Study after study has shown how art can bring long-term financial benefits (paywall) regardless of other asset classes. This is an important aspect that I stress to other galleries where I consult, as art collection is a relatively untapped market.
Elevate passive income by loaning artwork.
Once you’ve purchased artwork, that doesn’t have to be the end of the journey, as there are areas in the art dealership world that allow individuals to create passive revenue streams. One way to earn potential passive income is by loaning artwork to museums or auction houses to promote the artwork and increase the value of the collection. Many art collectors that follow particular artists are able to carve out sizeable revenue by routinely shipping out items from their collection to exhibits all around the world.
Loaning out artwork to a gallery or museum allows you to share your art collection with communities, increase your contacts in the industry and also possibly qualify for tax breaks. Before getting started, a comprehensive loan agreement should be adopted between you and the gallery that includes insurance as well as clear shipping and storage instructions to protect your assets. Of course, loaning is no guarantee to generating revenue, and it’s imperative to have complete confidence in who and where you’re dealing your artwork.
The art collection market is changing.
Art dealership and the sale of luxury goods has undergone a radical transformation in the past few decades, and these new emerging economies have given the market more depth and resilience than ever before. One of the best advantages to owning artwork is how strong returns have been across periods of time and when compared to other traditional asset classes. I remind potential art collectors about how art can yield solid dividends and protect against inflation, and this has only been cemented by the success of auction sales within the past decade. An artist may only produce a few works every few years, but that output typically increases in value upon retirement or death and can be held for decades or even generations before being sold for a profit.
Technology has changed a variety of industries, but in the creative world of art dealership, there has been a significant transformation that has only elevated the industry as the global market continues to expand both virtually and in real time. The appeal of investing in artwork is only likely to increase as more people search for viable options in diversifying their portfolios.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.