WHY YOU CAN'T TRADE ART LIKE STOCKS
Posted on in Editorial by Sonja
Investing in art assets as an alternative has been gaining in popularity over the past few years. Here are a few reasons why you shouldn’t view the art market like the financial market:
The art market is not as regulated as the stock market. Unlike the stock market, the art market does not have government division tasked to oversee the market - a financial market equivalent being the SEC. Instead, the art market has a set of best practices exercised by the industry - but not every institution follows them.
The art market is relatively illiquid. Similar to the real estate market, investors cannot just buy and sell assets with a single click of a button. Auction houses, dealers and galleries adopt processes which take time - from several months to several years, and transaction costs are much higher than the financial market. The illiquidity is what makes investing in art a viable option - it is safe, and is a lot less volatile than the stock market.
Lack of transparency. The art market is not an open book. Galleries and dealers usually leave prices and buyers unknown to the public. Only data from auctions are made available to the public. However, the information is not made available immediately, unlike the stock market where prices are tracked and made readily available. To provide more transparency in the art market, there are indices such as Art Market Research and Mei Moses. The problem with theses indices is the lack of transparency - Art Market Research removes outlier results, while Mei Moses only accounts for auction results from Christie’s and Sotheby’s.
Nonetheless, investing in art is a great way to diversify your portfolio - as long as you are well versed in the art market or have the right expertise to make the correct investment decisions for you. Companies like Arthena make investing in art transparent and highly regulated. Arthena follows a strict code of conduct when acquiring assets, which is clearly outlined for every investor. Arthena also invests in works that are under $250,000 as it is the most liquid segment of the art market - overcoming the issue of illiquidity. Lastly, by purchasing and divesting works at auction, Arthena is able to be as transparent as possible with investors. Arthena also prides itself on combining art-world expertise with analytics to make the best investment decisions. Like any investment, investing in art is risky, but it is worthwhile when given the right expertise.