Why and how you should invest in art?

Sai Ratna Manjari,

Someone’s sitting in the shade today, because someone planted a tree a long time ago
                                                                                                                                                          –    Warren Buffet

In the times of plummeting stock markets and disfigured economy such as now, an investor may look for an asset that is more independent and relatively non-wobbly with time. Serious investors are looking at alternatives that are unconventional, yet profitable alongside popular bonds, equities etc. Art is one such investment likened to real estate that is gaining momentum, lately. Although profitable if invested wisely, art is an extremely risky asset and therefore needs wisdom and good analysis before venturing into it.

How to invest in the right kind of artwork?

If you have an eye for an oeuvre, then you know what genre you are contemplating at. Most people who prefer to invest in art are also the people who enjoy looking at it. However, first time investors can seek help of internet or art expert to pick a champion. Knowing the market for an individual artist and what price his piece of work will fetch in long run is something unpredictable. Nevertheless, seeking advice from an art connoisseur such as an investment expert or an art consultant could come in handy while narrowing down that piece of work. Not to mention, doing your own research about the artist, his background, his works, market trends etc. could provide some vital inputs in decision making. For example- find out if the artist whose work you chose to buy has won any awards, has exhibited his works nationally and internationally, does museums or galleries display his works? etc.

There are several types of artworks to invest in. Some are expensive while others are not, depending on their value and the returns they can provide in future.

Original art works: These are the canvases painted or sculptures chiseled by the artist himself. They sure have fancy price tags, but can provide good returns in future, sometimes way more than expected. They are accompanied by certificate of authenticity signed by the artist.

Prints: These are copies of original art works that are affordable, yet less profitable in future. However, limited edition prints are relatively more expensive with possibility of higher returns albeit lower than the original piece. They usually come with certificate of authenticity signed by the artist himself.  Posters such as giclées are good quality prints with low returns over limited editions or original works.

Where to buy the artworks?

With sale of fake artworks being rampant in art market, it is best to put your money in trusted sources such as auction houses, museums, gallery, art exhibits or online stores.

Art galleries or museums: These are the places where art is out on display for significant stretch, giving you time and energy to brush through the works of various artists. They sell and/or re-sell the works of artists at good price. Many galleries encourage new talent through selling their works, while some re-sell the works of established or known artists. Jehangir art gallery, Mumbai is one of the sought-after private galleries displaying works of renowned national and international artists every year. There are several government and private museums or galleries that sell artworks of high to mid-range artists from India and abroad.

Auction houses: These are the places were works of art are sold through bidding. The bidding starts with an initial price that will eventually rise with each bid, sometimes skyrocketing based on the work, artist, age, genre, market value etc. Note that the winning bidder needs to pay buyer’s premium over the hammer price that goes to the auctioneer as administrative cost. The buyer’s premium can be anywhere between 10 to 30% of hammer price. Nevertheless, auction houses are great place to buy a masterpiece worth a fortune for passionate collectors. Christie’s and Sotheby’s are international premium auction houses, while Saffronart is one of the well-known auction houses in India, among others. According to Art price, “art market is growing continuously, in 2019 alone over 550,000 fine art pieces sold across the world through auctions, generating a global total of $ 13.3 billion. This is considered to be the highest ever recorded fine art auction in a single year”.

Online stores: Most millennial generation, who are slowly inclining towards investing in art, prefer shopping from their couches. Here, distance is no bound as a collector sitting in New York can buy an art in India without any hassle. However, researching the art piece and choosing the right vendors for buying art is crucial. According to ‘An Art Basel and USB report’ on art market 2020, prepared by Dr. Clare McAndrew, founder of art economics; “online sales of art and antiques were estimated at $5.9 billion in 2019. While, 92% of the art was bought online by high net worth millennial collectors, who have paid $50,000 for a work of art or object online”. Indiearts, has been one of the dedicated and trusted online platforms for buying works of several renowned artists, over the years. We provide online catalogues and transparent business channel for your smooth buy.

What you should know before you invest?

While fine art may diversify one’s portfolio, be sure to invest in it only when you have extra money in your pocket, as your collection may or may not materialize into profits you wish to seek. Nevertheless, a well-researched buy may fetch a fortune. For example: Tyeb Mehta’s ‘Durga Mahishasura Mardini’ painted in 1993 auctioned for over 20 crores in 2018. While, Amrita Sher Gil’s 1934 artwork ‘The little girl in blue’ sold for record price of 18.69 crores, this work was held in the previous possession for about 80 years before being auctioned.

Akin to any other monetary investment, there are few upsides and down sides to the art investments as well.

Pros:

  1. If you value art and have an eye for it, then collecting and investing can go hand in hand.
  2. Art piece if chosen wisely based on artist’s value, background, history of art, time and a bit of a luck can provide incredible returns
  3. Art prices do not fluctuate with time unlike stocks
  4. It is a great long-term investment for at least 10 years. Sometimes the older the artwork is, the better is its value.

Cons:

  1. Art is a non-liquid asset, which mean it is difficult to convert it into cash as and when you want similar to real estate.
  2. Once you buy an art piece, be informed that you will have to take good care of it by keeping it safe from sunlight, humidity, pests etc. while on display. However, if you wish to store the work, you may have to pay for its better storage.
  3. Aside from buying the artwork one has to spend on certificate of authenticity, insurance, shipping cost, buyer’s premium (if bought at auction) etc.
  4. There are no guarantees if the value of an artwork will escalate.

 

Conclusion: To buy or not to buy an art piece is an individual’s hunch, clubbed with well-researched analysis. But a good piece bought wisely, when sold can provide some unbelievable profits leaving the art market ever so lucrative. In the technology era, art world is more transparent than ever with online databases, clickable catalogues and first-hand information on collectibles. Investing in a good artwork has never been smarter than this.