How to Invest in Art?

Indian art has become a force to reckon with in the international market. Even while the global art market is destabilised, Indian art is steadily holding its own; albeit on a lower scale than a few years ago when Tyeb Mehta’s ‘Mahishasura’ being sold for $1.5 million was being touted as a vindication for Indian art. While it is true that prices which had boomed a few years ago have now plateaued, it is also true that for those who have liquid assets this is the best time to invest in art. In fact, many a great art collections were built during the recession of the ‘90’s. This brings us to the moot question that every new investor would like an answer to “How to invest in art?”

Know your art: When it comes to buying stocks you would undoubtedly study the market, go through past company records, see the financial health of the company. Investing in art requires the same amount of understanding and research, only in this case you will be focusing on the artist whose work you are planning on buying. Following are the points that you should cover in your research:

Go through his profile, it makes a difference if the artist has been to an art school or is self-taught.

Consider which galleries are promoting the artist, how many exhibitions has he shown his works in, who have been past buyers of his works, have his works been acquired by art museums or institutions?

Before zeroing in on a particular work, see the previous and current works of the artist. Ideally it is advisable to purchase work in the particular style associated with the artist.  A one off experimentative work may appeal to you but would perhaps not be the best option when you seek appreciation on your investment.

For a painting to have an appreciation value it must be ‘timeless’ which means it should be able to transcend currents fads and trends. For instance, the Indian art market a couple of years ago was flooded with images of the Buddha, with new buyers seeking the Buddha in line with the Feng Shui fad; these have little or no investment value.

Consider the provenance of the work, especially if the artist is well known. Insist on an authenticity certificate, signatures are very easy to forge and with the high prices that well-known artists command, fakes are a lucrative market.

Of course, it the job of the gallerist to guide you before you make your purchase, but always bear in mind, that they too are interested in making a ‘sale’ so learn to read between the lines.

Established or Upcoming Artist? This question can be easily answered by considering what returns you are seeking. If you are looking for short term gains then by all means buy an established artist, where you are likely to make an estimated 20% gain annually if you choose to resell your work. However, if you are able to have a lock in period of about 3 to 5 years for your investment, then upcoming artists are a more exciting option. For the reason that if the artist you are backing does become a sensation, then your small investment will truly escalate, besides you get the satisfaction of knowing that you have a good ‘eye’ for art and chose well. It is always advisable to balance your art portfolio with works by both established and emerging artists. Just as not all upcoming artists will be successful, similarly not all works by established artists are masterpieces and appreciate in value.

Art for Art’s sake! Purchasing art cannot be just a business decision, because unlike stocks, here the ‘product’ that is the paintings should appeal to you on an emotional level as well. In fact, very often an artwork that manages to capture your imagination and wonder; is most likely going to appreciate in value as well. Again, unlike stocks, you are not going to get monetary dividends from your investment, but you can get hours of viewing pleasure from your artwork. Besides, you are likely to maintain a gestation period before re-selling the artwork, so you may as well purchase something you like – buy an artwork for its intrinsic value, the material returns will follow!

Art Funds: For those who wish to take advantage of the art boom, but would rather leave the purchase of artworks to the experts, there is the option of Art Funds! They function in a manner similar to the mutual funds and here their portfolio consists of works by artists which their experts recommend. Some art funds that cater to the Contemporary Indian art market are Copal Art, Edelweiss Securities, Crayon Capital, and Osian’s Connoisseurs of Art. These funds are listed on the stock exchange and you monitor their performance. These funds will have a minimum investment requirement and lock in period as well. After deducting their managerial fees, they distribute the profits from the sale of the artworks to their investors. 
A word of caution though - Investing in Art Funds does not guarantee a return: evaluate an Art Fund carefully like you’d evaluate any other similar investment! 

Spot the Original: There have been many instances in recent years of ‘fakes’ of popular artists surfacing in art market. Popular artists whose works command astronomical prices often find themselves embroiled in controversies of unscrupulous dealers and gallerists selling fake works. For a novice art collector, it would be of course impossible to spot a fake from an original. It is always prudent to ask for the provenance of the work and a certificate of authenticity (genuine gallerists would provide these without your even having to ask for them, bCA Galleries provides a certificate of authenticity with all its works). Besides, most artists now prefer to associate with a particular gallery, if you purchase from that gallery you can be assured that you have an original!

The essential basic point to remember while investing in art is that it is not a very ‘liquid’ asset. There could be instances of artists you have purchased not appreciating in value, there could be a long gestation period. At the same time, ‘art’ is probably the only ‘collectible’ which has a reasonably structured and transparent market. Prominent galleries which deal with the top level artists can even offer you a buy-back guarantee on the artworks. Ride the boom of the Indian art market but play safe for when the levelling process sets in!

Fast Facts for investing in Art:

Buy a work that you feel a connection to

Research the artist

Check out the provenance and authenticity of the artwork

Buy work that is typical of an artist’s style

Be prepared for a gestation period on your investment

Purchase a mix of established and upcoming artists in your art portfolio

Art funds are an investment option for those not looking to physically own works

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