There is a generalized notion that investing in art is only for the English aristocrats with huge amounts of cash, but this cliché could not be further from the truth. Consider the opportunity to invest a substantial amount in the production of an album by a successful band like U2 or Madonna. Music is art. Or maybe the chance to invest in a motion picture directed by Steven Spielberg or James Cameron. Movies are art. But unlike these two forms of art that see a huge risk in the future due to the technology revolution that is making digital reproduction very easy, what we call visual arts and the world of antiques are not affected by this trend. Like antiques, artists through their dealers, have the ability to limit their works on the market to sustain a comfortable value, while at the same time getting enough patronage to keep working.

The Stock Analogy

The possibility of obtaining a great return on your investment in the world of art is a "secret" that is well known by the best investors in the world. Furthermore, in the past few years, the international art market has seen one of it's best "Bull Markets" in history. Real estate may be a very solid investment choice, but for those of us seeking a more aggressive approach, art & antiques can provide a better return than the bond market or even stocks with very reasonable risk. In fact, a stock portfolio can be very similar to an art collection. Just like there are start-up companies looking for venture capital, so are young talented artists who might not be well known in the art world, but whose innovative ideas can result in a great potential. Such is the case of Carlos Larracilla, Miguelangel Jauregui and Cyntia Caballero, whose works can be purchased from $1,000 to $10,000 USD. However, the risk for an up-and-coming artist is relatively high, since a bad choice by the artist or a bad review by a critic can send his prices plummeting.

But in the stock market, we can also find the tried-and-true solid companies that might net a good return without so much risk. In the art world, this is comparable to the established artists such as (in the case of Mexican artists) Francisco Toledo, Gustavo Ramos Rivera and Juan Torres, whose great works can be acquired from $10,000 to $100,000. The analogy ends here however, since the stock market doesn't contemplate the third type of investment strategy: antiques or works by deceased authors.

The Antique Myth

Now, let me make a parenthesis here to talk a little about antiques. In daily terminology the word antiques has been greatly devalued to mean anything from old pots to trinkets that you invariably find on the walls at your friendly neighborhood chain restaurant. For this grave error, we, the antique dealers, hold much of the blame since in the last decades, we've dedicated ourselves to following or imposing trends that will only artificially inflate prices of items that should not be considered antiques. Trends are changing constantly and so years later we find those same artifacts populating our secondhand stores and bazaars. Real antiques are those objects which are already approximately 100 years old, that were made for utilitarian or decorative purposes, that possess a value for their historical importance, rarity, manufacture, composition or other characteristics and for which a market of collectors has sprung. What happens with these objects is that their inherent value makes them invulnerable to decorating trends and so they are constantly rising in value. It's these "real" antiquities that, like the works of the late great artists, can make a great investment, while also proving to be a source of awe and beauty for those of us who learn to appreciate art.

Risk vs. Return

There are obviously several risks to investing in art or antiques. They can be direct, in the case of improper handling of pieces, excessive cleaning, an overly humid or dry climate and light conditions, in the case of works on paper, for instance. We must remember that art and antiques are the image of our collective conscience in a certain time and thus will one day in the future become part of our legacy. When we buy a work we are only depositaries of what with a little care might someday be the heritage of mankind. It's rather ironic that the lack of care to these works, which contributes to their scarcity, later on is what drives their value up.

Theft is another risk, although art theft is not very common, unless the works in question are very valuable and the thieves’ sophisticated, which is a rare combination. Common thieves are more interested in jewelry, DVD players and ipods and so an art collection will sometimes serve as a good way to as they say, "park some cash".

An indirect risk that can be a factor in an art investment is by means of public scandal. For instance, in 1999, thousands of apocryphal Salvador Dali lithographs were found at the Perrot-Moore Art Center in Cadaques, Spain. Also found, were large stacks of blank papers bearing the signature of the Catalan master, which were supposed to be used for producing more fake prints. John Peter Moore, a former secretary of Dali in charge of international marketing and his wife Catherine Perrot were charged with art fraud by a Spanish court. Setting aside the legal implications of this, there was widespread impact in the market of Dali works that affected the prices of his art, most notably in his post-war era.

By the same token, in recent years, well known art critics have dedicated their efforts into giving a series of scandalous declarations, many without any basis whatsoever, which have brought forth a general lack of confidence in Mexican art. This was particularly the case in which the highly regarded Raquel Tibol waged a war against Adriana Siqueiros that was enough to make Sotheby's remove a work by the Master David Alfaro Siqueiros that was featured in the front page of their catalog from their Latin American Sale. Tibol recently said she would cease emitting opinions of works to the prestigious auction house, but the impact of this scandal can still be felt with disappointing results of the November 2005 Latin American sales, in which the only works that sold well were by Fernando Botero, Matta and Candido Portinari, all of whom, by the way, are not Mexican. How is it possible that works by some of the most important artists in the world such as Rivera, Siqueiros and Orozco be sold for less than those of living artists like Richard Tuttle and Chuck Close? Perhaps this is the time to invest in Mexican art.

I do agree with Raquel Tibol that there are many fake works in the art market. But I don't think this problem is worse in Mexico than in any other part of the world. I personally, can't believe how some of the obviously horrendous fakes that are offered on ebay (almost always through private auctions) are bid on by unsuspecting buyers. There is always a risk, when buying in the secondary art market to end up with a fake. In Mexican idiosyncrasy it's very rare for people to file documents. For this reason, many of the works that can be found in the secondary Mexican art market are without documentation. Provenance, sales receipts, inheritance documents and such provide a clear path from the owner back to the artist and thus, buyers should always look for these to be included with the purchase of a piece. In the case that there is no documentation available for the work, a Certificate of Authenticity or "COA" becomes necesary. This document is a letter stating that the work in question (which should be pictured in the document) is authentic. It's imperative that this document be signed by an expert authority or board of such people. The expert(s) whose opinion should be taken seriously will vary depending on the type of antiquity or artist in question. Andy Warhol's works, for instance, can only be rightly certified by the Warhol Authentication Board and any other signed paper that says a Warhol is authentic is, for lack of a better term, worthless. A COA from a reputable gallery is rather more like a guarantee that the work is genuine without being definitive proof of this. Before you're confident of knowing how to discern fakes from originals, establishing a relationship with a reputable gallery might lessen the risk involved in purchasing art.

How an Art Investment Appreciates in Value

The return on your investment in art can't be measured in time, but rather in projection. One factor that can drive up the value of art is the artist. General interest caused by an exhibition, conference, the publishing of a book, or even the production of a major film (as in the case of Frida and Modigliani), will bring with it a new wave of people wanting to know more about the particular artist and the necessary demand that can cause a hike in price. In the case of visual arts, it's important to keep in mind that if the artist is alive, his or her new fame might allow the artist to become more prolific satisfying the demand while keeping the price at the same level. But then again, when an artist dies, such as the recent case with Raul Anguiano, there is a tendency to see a sharp increase in price for works of his creation, which is usually higher with early works. This tendency is due to the publicity generated by the death of the artist, as well as what we might call the close of his artistic production. Since the oeuvre has become limited in number a higher demand can now be only followed by an increase of the works' price.

A return can also be gained at the time of the purchase, and here's where the eye, investigation and passion of art come into play. The eye is crucial to recognize a masterpiece from the plethora of works that are available every day around galleries and markets. Investigation will be needed to find overlooked characteristics of our new purchases that might make them more valuable to collectors. And finally, we will have to develop a passion for recording and presenting our new findings to the community as well as defending them from skeptics. Although not as common as the "Antique Roadshow" suggests, in the world of art and antiques it's still possible to find a buried treasure.

Tax Benefits and Past Performance

We don't have a clear indicator of how an investment in art and/or antiques will yield returns per year since there are many factors to consider. However, best results will be achieved through collecting important works, by important artists and, I might add, that they have a special relevance in a socio-historical context.  Collections such as these can become an important asset that can be used as any instrument of finance. In the US, it's more and more common to use an art collection as collateral to obtain credit. Citigroup has been using this scheme since the 1970's, providing collectors with a convenient tax break compared to obtaining funds through the sale of their art.
 
It's also interesting to note the case of the Fine Art Fund, a British mutual fund based in the US that buys and sells works of art to obtain profits. Motivated by indexes of the works by great masters such as Monet, whose prices might rise up to 36% a year, or Andy Warhol, who's seen increases of up to 24%, it's hardly strange that a group of investors would jump at the chance to ride this coaster. The fund has netted an average yearly increase since 1974 of 11.3% with a startup investment of 40 million GBP. Unlike stocks, "a Canaletto cannot revert to zero", says Philip Hoffman, CEO of the fund. Extra income can also be achieved by renting works for exhibitions with the proceeds usually being enough to pay for maintenance and restoration expenses that may arise.
 
Every good investor knows that a good way to maximize profits while minimizing risks is to diversify your investments. I think art and antiques can provide an excellent way to invest while at the same time providing an opportunity to enjoy the beauty and ingenuity of human creation.