Investment in Art: Weighing the Pros and Cons

An individual purchases an asset, or equivalently makes a deposit in a bank, in the hope of getting a future return or interest from it. Currently, the common avenues of investment like stocks, bonds, real estate, etc. are not yielding great returns for the investors. It isn't difficult to pinpoint the mercurial trend of markets as the culprit. Given this, many investment analysts and leading art curators seem to be giving a go ahead to art as an investment preference. Seen as a cultural and financial phenomenon, this growing interest has made the art market a booming one. Demand has outnumbered supply, thanks to a new generation of buyers who are driving up prices for traditional as well as modern artwork while making headlines in the process. Although novel, this idea is fast catching up. Names like M.F Husain, Tyeb Mehta, SH Raza and Francis Newton Souza have already made a mark on the global front. Apart from the works of experienced artists, there are many takers for the contemporary artist's paintings. These include Shilpa Gupta, Aliya Syed, Navjot Altaf, Amar Kanwar, Zarina Bhimji, Ranjani Shettar and Raqs Media Collective.

Earlier paintings were bought due to interest in such art forms. But now they are also being bought with the purpose of investment. "Art is the only commodity, other than gold, constantly giving steady returns from the very beginning. Art can make its own money over a period of time", says Neville Tulli of Osian, one of the largest art auction houses in the country. This trend's popularity is proven by the fact that the financial sector has embraced the idea of "art as an investment option" with arms wide open. Many financial intermediaries like Citibank and ABN Amro are actively venturing into the lucrative field of art advisory business. According to Daniel Gross of Slate Magazine "Fine art is making huge financial news, what with cosmetics-heir-turned-super-collector Ronald Lauder paying $135 million for a Gustav Klimt painting and Sotheby's and Christie's posting gigantic numbers at their Impressionist and Modern art auctions". Closer home, the prices of Indian artworks have begun to rival those from some of the South-East Asian and Asian countries like Indonesia, Philippines, South Korea and Vietnam.

Apart from traditional galleries catering to the demand for art as an investment, online galleries too are mushrooming quickly. When you buy a piece of art, you possess a rare or one of a kind item. A non-paper financial asset, it may have limited correlation to other assets. Art also brings along potential price appreciation and possible diversification benefits. Albeit luring enough, spending large sums of money on art pieces might spell risks. According to some investment professionals there is reason to be wary of investing money in art. In the quest of buying high-quality paintings one might end up owning/selling frauds and fakes. The possibility of illiquid auction/dealer markets also exist apart from high maintenance and restoration costs. What needs to be understood is that no one can simulate a piece of art. Once bought, proper after care becomes essential. A thorough knowledge of the subject and the chances of it increasing in value are other important points that need to be examined. Owning art is no different from other financial or life decisions. Inspite of the booming status of art industry, the safety issue still looms large upon it. Therefore, one still needs to consider the pros and cons very carefully.