Along with any investment you make, there are significant risks and benefits to weigh before moving forward. It’s up to you to decide if the benefits outweigh the risk to see if the investment opportunity will help or hinder your portfolio.

ALSO READ: The Best Guide on How to Start Investing

Investing in art is no different.

Although it may not seem like it since it’s art, this type of investment does have its risks. However, the benefits tend to come out on top.

Why now talk about investing in art? Due to companies emerging, like MasterWorks, art investment opportunities are more readily available. You can buy shares in a masterpiece rather than spend millions of dollars on the whole thing, in hopes that you can sell it for more a few years down the road. They allow you to invest in art like you would buy shares of a company.

Art is continually gaining traction for many reasons, whether it be personal or investment reasons. That doesn’t mean you should instantly invest in it. As with all your other investments, it’s important to take the time to compare the benefits and risks to formulate an educated decision. To help you out though, here are four risks and benefits to investing in art that you’ll likely come across.

Benefit: Rise in Popularity

When someone gains popularity and momentum, that usually results in something good. In recent years, collectables and art have risen in popularity as we’ve seen record prices on particular pieces sold. Just recently, the famous Salvator Mundi painting by Leonardo da Vinci sold for over $450 million.

Now, not everyone has that amount of money kicking around, and nor will every painting, sculpture, or artifact sell for that much. However, it does show that people are willing to pay a ton of money, as the Salvator Mundi is the most expensive painting sold in the world.

The price of one painting isn’t the only reason why we see a trend in art investment. Recent studies expect to see the art industry rise to around $2.7 trillion by 2026. Within the first six months of 2017, there was an 18 percent growth in auction sales, which was almost a full percentage more than the same period in 2016.

Benefit: Outperforming Traditional Investments

In the last couple of decades, alternative investments, like art, has shown again and again that they outperform traditional investments like stocks. A recent look at alternative investments found that long-term return to be better than other investments like equities.

There are many reasons as to why art and alternative investments would outperform other investments in the market. It has a lot to do with art being non-correlated to the market, meaning that it won’t fluctuate as significantly or react to a drastic change in the market.

Risk: Art is Personal

A major risk worth considering is that art is personal. When you’re ready to sell either your shares or a particular piece of artwork in hopes for a return, it can be difficult finding a buyer. Not everyone has the same taste in artwork as you do, making this risk a potential to halt your return on investment.

Risk: Art is Tangible

The fact that art is a tangible asset is both a risk and a benefit. Another risk to investing in art is that it is a physical investment that is subject to damage from the outside world. You hear of fires engulfing a building and destroying everything in it. Even the smallest scratch on a masterpiece can drop the price in half, or make it worthless. You have to be very careful with each piece.

So, do you invest in art to diversify your portfolio? If you’re interested in alternative investments and do your research, you can gain a decent return on investment for this kind of investment.

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