In general, one should consider investing in art only after investing in traditional asset classes such as stocks, equity, real estate and gold. However, given the current scenario of the stock market, there are many prospective buyers with sufficient liquidity, who are looking at alternate options. Indian art has emerged as one of the safest investment instruments in recent times. However, investing in art is quite different from investing in other markets. While, it can be said that all investments require a fair amount of research, art in particular, requires greater research (as data is hard to come by) and an in-depth understanding of the art market dynamics. Another factor one must keep in mind is that art should be looked at as a fairly long-term investment, and to be aware that it is less liquid than conventional assets.
How can one spot a winner?
That is the million-dollar question most people ask when considering investing in art. There are many financial consultants who offer advice on equity and debt based funds, however, consultants specifically offering advice on art and its investment potential are very few. In such a case the onus of making the right decision falls on the investor. One can begin by studying the market, its trends and price graphs of well-known artists. It helps to define a budget that can be then sub-divided into parts according to the investment category – high risk, medium and safe.
Knowledge of art is an important consideration and it helps to read up on artists, their profiles, and in general keep abreast of updates on art related news and auctions. Once the generics are in place, one can look at details.
As a buyer a few questions that you need to ask yourself are,
What kind of work to buy – for instance, a painting, sculpture or a photograph?
Which artist/s to consider?
Where to buy from - a gallery, at an auction or a private dealer?
Will I be able to resell it? What are my options?
What are the various commissions and taxes that I need to know about?
Having the answers in place, it will be easier to begin shopping for art and in creating an investment portfolio.
(Published in Financial Times)