The Pros and Cons of Investing in Art

Nowadays, long-term investors are looking to diversify their investment portfolios with unique, different, and sometimes exotic assets. Some prefer to invest in cattle, some in wines, while others choose to invest in rare coins or authentic gemstones. However, there is one type of investment that has recently gained popularity: artwork. Aside from appreciation in value, collecting artwork allows you to support the artists or become a stockholder of other classical pieces. However, as with any investment, there are pros and cons of investing in art. 

The Pros and Cons of Investing in Artwork


Pros of Investing in Artwork

There are myths about investing in art that have kept the average person from entering this venture. There are concerns such as, “What if it’s a rip-off?” or “Investing on art is only for the rich; I don’t have funds for that.” These are all valid concerns, but there are clearly defined pros and cons of investing in art. 

1. Artwork is not subject to market fluctuations.

Financial stock markets can be volatile.  Seasoned stock market investors can tell you how much of a roller coaster ride it is. Fortunately, stock market corrections, fluctuations, and volatility are virtually non-existent in the art world. This one of the biggest advantages of this type of investment. You can sleep soundly at night, without worrying about what plagues other investors.

2. Your investment in artwork appreciates over time.

Unlike company stocks, which may reflect volatile prices, art investment usually appreciates steadily over time. If you have done your research and chosen an art piece wisely, it is possible to capitalize on investing in art. With a little time and luck, your art will be worth more than what you paid for it.

3. You can’t put a price on enjoyment.

The value of  personal enjoyment is priceless. A lot of art investors are collectors first and investors second. Fine art is an asset that can be appreciated and displayed. Take note, that if you have no interest in art, this could be tedious or difficult for you to invest in.

Cons of Investing in Art

Every investment you make comes with its drawbacks. You’ll have risks associated with investing in art as well. 

1. There are barriers to entry in the art world.

The main barrier to entry here is a lack of knowledge. To invest in the stock market, you need to research the company stock you want to buy. First you check the statistics, and then look at the history or earning reports. If it seems like a sound investment, you are only a few mouse clicks away from being a stockholder. When investing in art, you have to familiarize yourself with a lot of information before you make your first purchase. Furthermore, the knowledge required may be a little different from other forms of investing.

2. Artwork is not a liquid asset.

Art investment is not a liquid asset in comparison to other forms of investing. The buying or selling of some investment products is instant. With just a few clicks online or a simple call to your broker, the deal is done. However, selling art takes time, effort, and planning if you want to get the best price for your piece. So, if you think you will need your money soon, then this type of investment isn’t for you.

3. There is no guarantee of appreciation when investing in artwork.

Even if you think you’ve done everything right, there is no guarantee that every piece you buy will gain value. The art world is a fickle environment. It is possible that new artists quickly fade into anonymity, just like the last season’s trends. That’s why it’s important that you truly love the artwork you’ve invested in since you may need to hold on to it longer than you anticipated.

Seek Expert Advice for Investing in Artwork

If you are seriously considering a large investment in artwork, it is vital that the piece is authenticated. Not only does it ensure that you are actually getting what you pay for, but also that the piece is appropriately priced. Any piece of artwork worth investing in should come with documentation.

However, it never hurts to get a second opinion. If you have serious reservations or concerns, you can get an appraisal to prove the artwork is genuine. Navigating the art world can be tricky, so don’t be afraid to seek expert advice before investing.

Other Things to Consider before Investing in Artwork

It is also important to keep in mind that art investments take a sizable amount of initial investment money. Most art investors are putting at least five figures into their investments and see around 10.6 percent returns. That is, if any return is realized at all. It is possible your piece of art won’t appreciate in value. Sometimes, artwork only maintains value, which makes it an okay investment for tax purposes. But, it won’t necessarily make you a ton of money over time. 

Given the pros and cons of investing in art above, you have the information you need to make an educated decision. Thankfully, there are also plenty of pieces of information and help online. 

Platforms such as Masterworks can help you invest in art with less risk and help you identify trends before making a definite decision on your investment. You can even begin diversifying your portfolio without much money upfront. Check this out to see how.

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Next Steps after Reaching Your Savings Goal

One of the earliest pieces of financial advice we receive is to start saving early. Set savings goals and work hard to achieve them. Although it is wise to build your savings account, we often do not give much thought to the next steps after reaching your savings goal. But this begs the question, when can you say you have reached your savings goal? And shouldn’t you set another savings goal once you reach it?

Only you can answer these questions, so it is important to take them into consideration when planning for the future. Here are a few suggestions to evaluate your savings plan and decide what to do once you achieve your goal.

Next Steps after Reaching Your Savings Goal


The 50/30/20 Rule for Reaching Your Savings Goal

The first step is to create a plan to reach your savings goal. The 50/30/20 rule is a basic equation for people who do not like or struggle with detailed budgeting. Instead of tracking several categories, this strategy breaks your spending into three main categories: needs, wants, and savings. The actual amounts will vary based on your take-home income.

This simple approach cuts down the time you spend calculating your monthly budget. However, you still need to dedicate some time to sit down and work out the figures. First, you must determine your total monthly income after taxes. From the final amount, allot 50% for your needs. Then 30% can be used for things you want. Then, about 20% should be put towards your savings goal.

For example, let’s say your monthly take-home income is approximately $3,000. That means $1,500 would pay for your daily necessities. Be certain you are only including things you need to survive. This includes expenses for basic necessities like housing, food, utilities, transportation, health care costs, and minimum debt payments. If 30% has been dedicated for your wants, you should have about $900 available to spend. Finally, about $600 would go towards your savings.

There has been some dispute for those who live in places with a high cost of living. If food and housing are more expensive where you live, more of your monthly budget will go to your daily needs. Another point of contention is with the percentages for higher income earners.  Some argue 30% is way too much to spend on your wants. While the 50/30/20 rule is an excellent guideline, you may decide to tailor it to your finances to build your savings account or take the next steps after reaching your savings goal.

5 Steps After Reaching Your Savings Goal


1. Evaluate you Budget and Savings Goal


Keeping tabs on your finances and living under stricter spending limits helps you achieve your savings goals faster. After you create a monthly budget, you can also learn to spot negative patterns. Try to find ways to cut unnecessary spending and redirect money to pad your savings account. Those micro-transactions can really add up quickly and work against you.

If you have extra money at the end of the month, double-check your statements to make sure there were no missed payments. However, if you still have money to spend, it is time to create a plan for your next steps after reaching your savings goal.


2. Pay Down Your Debts


Becoming debt free is a common financial goal. If you have a little left over, it could be an opportunity to pay down more on the principle amount owed. There are two approaches towards tackling debt repayment; the Debt Snowball vs. Avalanche methods. Both have been highly successful in helping people become debt free, but perhaps one will be more beneficial to you. The Debt Snowball method pays off the smallest debts first to reduce the number of lenders you owe. However, the Debt Avalanche method takes on the debts with highest interest first. Whichever approach you choose, paying down debt is an important step after reaching your savings goal.


3. Use Your Savings to Invest


Another wise way to secure your savings is through investments. You can use that extra amount to buy shares in mutual funds or open supplemental retirement accounts. If you want to contribute to your family’s future financial security, you could invest in stocks or bonds for your children. With compounding interest and time, small investments can accrue into significant sums of money. When they become of legal age, they could have a large lump sum to help give them a head start in life.

Here are five of the best investing apps you can use to start saving to invest. We included the fees and minimum and what it is best for so that you have a glimpse of what these apps are.

AppFees and MinimumBest for:
RobinhoodFreeInvesting for Everyone
Acorns$1 per month
Spare change investing
Ellevest$1-$9 per month
no account minimum
Investing for the future.
The Motley Fool$99 for the first year.Stock advising

4. Look for New Opportunities


For some people, the next step after reaching your savings goal is to look for new opportunities. Perhaps you decide to splurge a little on yourself or use your savings for something that you enjoy. You could take up a new hobby or try an activity that was previously out of the budget. It could be the perfect time to use the funds to finally take that dream vacation or buy a vacation home at your favorite spot. You could also fund that business venture you have always talked about pursuing. Once you have taken care of all your other financial obligations, it is a good time to look for new opportunities.

5. Secure Your Financial Future


For others, the most practical next step after reaching your savings goal is to secure your future. First, revisit insurance policies to ensure that you are appropriately covered and your loved ones are taken care of. While you likely already regularly contribute to your retirement accounts, you can increase the amount or find new vehicles to supplement your retirement funds as well. Investing in your future is always sound advice.

Furthermore, you may want to secure your family’s financial future. If you are just starting a family or looking for more space, you could use your savings as a down payment on a home. You may also consider opening an account in your children’s name or starting a college fund for them. These are huge expenses later in life, so every bit helps lessen the financial burden.


What to Do After Reaching Your Savings Goal

Although it may still be a pipe dream, you should consider what you would like to do after you reach your savings goal. You cannot be in a constant state of striving for the next goal. It is important to recognize the milestones as they come. This doesn’t need to be anything extravagant, but take time to celebrate your successes along the way.

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