14 Jan 2009

Be cautious when making fresh investments

By Nalini S Malaviya

This year the stock market has seen major fluctuations and there are still no immediate signs of easing of the economic recession. Investors are facing a dilemma about where to invest. The financial scene appears bleak at the moment, and most predictions point towards a troubled future. Recent trends in the art market, too, have failed to inspire confidence in investors. Prices of most artists have fallen either substantially or at least marginally. Many senior artists are now opting to have an exhibition of their works without offering any piece for sale. This appears to be a strategy to try and maintain their market rates, but, how successful will it be, will become clear only over the next few months.

In such turbulent times investors should be wary of making any fresh investments in art. In case they would like to do so they should consider all aspects related to the art market dynamics – investment timeframe, risk factors and ease of liquidity. One could opt for artists who are considered safe from a financial investment angle and who have established and proven themselves over the years. Although, this forms a safe category and involves blue chip artists, the amount of initial capital is fairly high, and that can be deterrent for a lot of investors.

The other option which is appearing attractive is investing in upcoming artists. The major reason why this is catching on in a big way is that prices are low and these make for excellent wall fillers. However, one must be aware that the risk is high for this particular category. As the capital required is low, most people are open to spending a part of their disposable income on such art. In this case if one can do a certain amount of research, and back it with technical expertise in order to select quality works, it increases the chances of picking up a winner.

(Published in Financial Times)
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