Art’s 11.5% Returns Have Outperformed S&P 500

Looking for an alternative investment but aren’t sure where to turn? It could be an asset worth considering if you have an art appreciation. Between 1995 and 2023, contemporary art has given investors an annual return of 11.5% – nearly 2% more per year than the S&P 500 over the same 28 years.

What about the cost? Investing in fine art is indeed expensive. However, suppose your budget doesn’t allow you to buy art outright. In that case, you might consider acquiring less costly works from an up-and-coming artist or purchasing a portion of a particular piece through online crowdfunding.

Historical Performance: Art’s 11.5% Returns From 1995 to 2023

Investing in fine art isn’t just something high-net-worth individuals do because they have the money and aesthetic sensibilities. It’s also because they find value in investing in works of art. Many worth over $50 million dedicate about 30% of their investments to art.

Art has a low long-term correlation to other assets. The value of a piece of art doesn’t tend to go up and down with the volatility and fluctuations in different markets. It also typically appreciates the longer you hold it.

Art market returns from 1995 to 2023 have averaged an annual rate of 11.5%. During the same 28 years, the annual rate of return for the S&P 500 was 9.6%.

Fine art investing has long been regarded as the domain of well-heeled older investors. However, young investors are taking notice of this timeless asset type as they look for alternatives to stocks.

Investors aged 21–43 with more than $3 million hold just 25% of their investments in stocks, while older investors hold around 55%. About 73% of those young investors are turning to alternative investments, particularly art.

Why Art Has Outperformed the Stock Market 

Historically, contemporary art has driven higher returns in investment portfolios and improved the appreciation rate. The latter can help you understand an asset’s financial performance. Many things influence art appreciation rates, including economic and cultural dynamics.

Economic factors like inflation and recession can influence consumer spending and investor behaviors. However, the art market has proven resilient to disruptions, recovering quickly over the last 16 years from the 2008 global financial crisis and the fallout of 2020.

Contemporary art has appreciated at a compound annual rate of 12.6%, outpacing the S&P 500 (9%), gold (5.9%) and other asset classes from 1995 to 2022. Based on 80,000 art auction prices over time, Sotheby’s Mei Moses Index shows that the art market has grown 8.5% annually between 1950 and 2021.

Scarcity, demand and the intrinsic value of art all play a role in its value.

Artworks remain scarce since artists typically only create one unique piece at a time. Similarly, demand can be driven by the artist’s reputation. While scarcity and demand play important roles in pricing art, its intrinsic value – the quality of the work and its cultural and historical significance – is critical to its overall value. 

Art vs. Traditional Investments

Art has become a popular alternative investment asset in recent years.

It offers significant returns and can diversify your portfolio with an asset that demonstrates little to no correlation with other investment assets. As a bonus, it’s a tangible asset that can provide enjoyment and be an interesting conversation starter.

According to the Chartered Alternative Investment Analyst (CAIA) Association, allocating a portion of your investment portfolio to art can improve its overall performance.

CAIA demonstrated this by adding art to three investment strategies: a basic portfolio with a split of 60% stocks and 40% fixed-income assets, a “well-diversified” portfolio and an endowment-like portfolio. It found potential significant improvements in risk-adjusted gains, appreciation and lower volatility.

As a benchmark, the S&P 500, the 500 top company stocks in the United States, can indicate how the overall economy is doing. Fine art is an alternative investment to traditional investments, such as stocks, so showing how the choices compare makes sense.

Case Studies: High-Performing Artworks From 1995 to 2023 

The art market in 2023 was worth $65 billion, a slight decrease from 2022.

Personal tastes and changing cultural preferences constantly reshape the market. However, introducing technology, including digital art and online platforms to support fractional art ownership, may also change the landscape while investment in art continues.

Here’s a look at some of the artists and works showcasing the high performance of art between 1995 and 2023:

Jean-Michel Basquiat

The neo-Expressionist painter Basquiat is considered one of the most important artists of the late 20th century. In 2017, an untitled oil stick, acrylic and spray enamel on canvas he created sold for a whopping $110.5 million. 

Helen Frankenthaler

Frankenthaler was an American artist known worldwide for influencing the transition from abstract expressionism to color-field painting. Her “Giant Step,” an acrylic on canvas, was purchased for $153,100 and sold at auction for $2.4 million 17 years later.

Yayoi Kusama

Japan’s Yayoi Kusama is considered one of the most influential living artists. She’s admired for her installations and sculptures that explore her obsession with polka dots. Her painting “Pumpkin,” an acrylic on canvas, is currently worth $27.8 million.

While this small sample isn’t indicative of all art sales in the last 25 years, it can give you an idea of how works of art can appreciate over time.

How to Get Started With Art Investment

Now that you know a little more about investing in art to diversify your portfolio and boost potential returns, consider starting your art investment journey using the Masterworks online platform.

Masterworks boasts annualized returns from 5% to 77%. It offers blue-chip art, a category of high-quality art from established artists whose work is in high demand. You can buy outright or purchase a share of it. It just might be the shot in the arm your portfolio needs to start generating sizable returns.

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