These Five Factors Foreshadow A Price Escalation Of A Fine Art Piece

Investing in the S&P 500 from 1995 to 2022 would have netted a comfortable 9% per year on average. In other words, you would've gotten nearly 10 times the initial amount of your investment. 

While that's a pretty penny, it's just a fraction of what post-war and contemporary art would've brought in. Its average annual returns for the same period clocked in at 12.6%, meaning you would've taken out more than 24 times what you put in. 

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But investing in art differs from investing in stocks, and that's especially important now that fractional ownership of multimillion-dollar paintings is available to all. While stocks are often bundled into indices, artworks are mainly sold separately. Thousands enter the market each year, but only some experience rapid value increases. Contemporary and post-war art is fertile ground for such upswings, with many selling for five figures one year and going under the hammer for millions in the next.

Identifying those before they explode in value is an art in itself. And a lot of money awaits those who master it. Just like predicting the movements of stocks, it's difficult to do, but it's not random. Art market experts at Masterworks use the following five factors to predict who will get ahead of the pack in future auctions.

1. Notoriety

The impact an artist has on culture is a critical factor. When Banksy shredded his own painting moments after it went under the hammer, the price of the piece paradoxically went up. Such a strong message showed audacity to the art world, and it responded with greater appreciation.

2. Career Stage

The phase of an artist’s career when a work was created can influence its value. For some artists, it's their late-stage work that sells at a premium. For others, like Jean-Michel Basquiat, his works from 1982 are the most valuable.

3. Provenance

The history of ownership of an artwork can greatly enhance its desirability and add value. A piece’s provenance that includes famous collectors or prestigious museums and galleries can substantially increase its market value.

4. Identity

In today’s market, the artist's identity can play a major role in their performance. There has been a noticeable shift toward inclusivity in recent years as modern collectors seek to diversify their collections with works by young, female and minority artists.

5. Connections

The art world is no exception to the age-old "it's not what you know, it's who you know" rule. Artists like George Condo, who have built strong networks with top artists and tastemakers, often see a positive impact on the value of their works.

You don't have to take on the burden of using these and many other factors in the field. Masterworks combines the world's biggest artwork data set and the knowledge of seasoned art market veterans to pinpoint the most promising pieces. It greenlights less than 5% of what it's offered. You can invest in the shares of those paintings with a few clicks and receive profits when they get sold with an upside. The company has earned the trust of over 800,000 members on its platform and currently manages almost $1 billion in assets.

If you're looking for a reliable asset class that has shown comparatively less volatility, devoting 5% of your portfolio to fine art through Masterworks is a great avenue to explore.

Click here to begin investing with Masterworks.

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