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Factors that make art investment more rewarding and fulfliing
Art is now a crucial component of an alternate investment portfolio. This shift of strategy is largely being driven by the fact that different forms and mediums explored by a multitude of talented artists internationally including those in India are drawing the attention and valuation that it thoroughly deserves. How does one look at the development of contemporary art and the benefits of art in a portfolio?

The fact remains that investing in art is now gaining prominence and acceptance around the world. Niche investors are now increasingly looking to employ diversification strategies. They are turning to more eclectic investment and asset classes for their portfolios, keen to explore art as a valuable, collectible asset against other asset classes, such as equities, bonds, gold and real estate. This trend is visibly impacting the dynamic wealth management strategies of investment managers.

The increasing activity of prominent art auction houses, art galleries and art institutions has laid the foundation for a solid secondary market, which buyers can access. Art is now viewed not only as an object of pleasure but also as an attractive asset to hold. Confirming the fact that art has a place in an investment portfolio, Prof. Michael Moses a professor at New York University’s Stern School of Business, reasons that because it is non-correlated with financial markets, it constitutes an alternative asset which mitigates risk. William Goetzmann, a Yale professor with his own art index confirming the value of art from the investing angle, has once pointed out that his art market index performance generally lagged behind the financial markets by about a year, but in the long run outperformed all other assets.

By his measure, he does not see the art market as ready to deflate, in part because the financial markets are still doing well. This trend applies equally to Indian markets. So, even though there’s talk of how overheated the art market has been Don’t press the panic button as yet! A news report in the International Herald Tribute (IHT), discussing contemporary art as the new status investment, had rightly mentioned: “Contemporary art is not for everyone. But fanning the excitement that it generates and expanding the market is not difficult these days."

Art as an asset has to have a long term investment perspective. It makes sense to approach experienced art advisors to understand the intricacies of the art market. They obviously are better placed to carry out a detailed research and review of recent auction results. Expert inputs are indeed crucial from the point of view of understanding artistic significance and market potential of a particular piece. Of course, you may conduct your own study of the art market.

Research regarding an artist, established or upcoming, gives definite clues to the intrinsic value of his work. It involves a thorough documentation of aspects such as the artist's age academic qualifications; awards, citations, scholarships received; participation in national international shows and workshops; subject matter of the work; ability to explain it and, of course, the thought processes, technique and style of work. Aspects like buyers’ list, critics’ perception of the artist and association with prominent art galleries also need to be considered.

Established artists have sustainable value. On the other hand, younger artists have higher risk/higher return. It is possible to track a particular artist’s growth in terms of market valuation by comparing past and prevailing prices for his or her works. Evaluate the asking price for each work of art. Establish the fairness of the price quoted. Know what to ask sellers to find out basis of art prices. Use price references by tracking an artist's sales history, analyzing relevant price data, and assessing an artist's potential in the marketplace. If possible, consider the artist’s international presence or exposure since it represents the future promise.

If a certain artist is commanding a higher value compared to that in the past, it’s obviously because of genuine popularity and demand. This is owing to the limited supply situation for great works of art that tend to command a higher premium in price. Also, keep a close eye on acquisitions made by distinguished art buyers and collectors. It is imperative to buy from reputed galleries as they promote and nurture an artist’s career.

Know about payment options, return & exchange policies, consummating sales, documentation procedures, and how to ensure you get what you actually pay for. There is a basic difference between buying at traditional auctions and online auctions that you need to grasp. Learn about the procedural differences between offline galleries and online auction houses. Study their functioning so that you do not harbor any misconceptions about auctions. Learn online auction buying basics, so that you can buy the right work at the right price.

Investing in art is largely about spotting the potential early in a budding artist. This is not difficult since information about individual artists and broader art market trends is now available online. The decision making may also be subjective since each collector, buyer, or researcher would tend to identify with a particular style of work and would fancy it even from the investment angle. Art appreciation is a separate subject altogether, albeit vital to investing in art.