Thursday, May 23, 2013

Work out your approach towards collecting art

A key to become a successful investor is to work out your approach towards collecting art. This implies understanding what type of a buyer you are. There are two broad types of buyers in the art market. There’s a category of buyers for whom the idea is to buy art purely to harness their passion and love for art. In this case, fascination and fondness for art inadvertently results in adding colour and richness to one’s precious portfolio.

Rightly or wrongly, this breed of investors is now rather less common. Most buyers, in the contemporary art market, originate from an aware financial background. This is the dominant sophisticated class of buyers that increasingly drives the market. This second class of buyers wants to support its buying decisions purely based on financial parameters. It’s not hard to understand why art increasingly forms part of the balance sheet of prestigious private clients of many portfolio advisors and wealth management firms.

Keeping aside the moral side of the debate on investing for passion or money, you need to honestly assess your buying behavior and temperament apart from reasons for which you want to buy art. Is it really advisable to fall in love with your holdings (in this case, artworks) acquired from a pure investor’s perspective? This can be decided by paying attention to two simple facts.

You need to decide whether you do not mind considering the art world and its movements similar to the way you look at the way the stock market works and behaves – part speculative and part value and fundamental driven. The second thing to consider is whether you perceive the price boom as a cyclical one, or you see it as part of a long-term trend that will sustain itself, resulting in prices of art pieces you hold scaling new peaks.

Of course, the answers may not be definitive, but it is vital to keep them in mind before following the footsteps of new breed of buyers with the idea of making quick bucks. Remember, patience pays.

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