One of my former co-workers invested heavily in the “Aggressive Growth” fund in her IRA, and lived to regret it during the last stock market crash- she lost nearly everything. I, on the other hand, hadn’t invested anything at all in my IRA. My mother, being the savvy investor that she is, was the smartest one of the three of us. She had been heavily invested in the market in previous years but had pulled all of her money out of the market prior to the crash, because in her opinion stocks had been overpriced.
In so many ways I think that investing in art could be compared to investing in the stock market, which could also be compared to gambling. The art market has its unpredictable ups and downs in much the same way that the stock market does. The goal in both cases is to buy low and sell high. However, In contrast to the stock market, where you might end up with nothing to show for your money in the event of a downturn, when you invest in art you will always at least have something to show for your money.
The number one rule in art investing is to buy what you love. Owning original art is an expression of your own personality. It’s an investment that will bring you joy in a way that few other investments can. (And who can put a price tag on the joy that art brings?)
Investing in living artists is one of the gutsiest things a person could do, yet it has the possibility for huge payoffs. For example, well-known art collector Charles Saatchi, co-founder of Saatchi and Saatchi advertising agency, made a tidy sum on a purchase of artist Damien Hirst’s early work. According to answers.com, “Hirst bought back a number of works from Saatchi for a total fee reported to exceed £8m. Hirst had sold these pieces to Saatchi in the early 1990s for a few hundreds of pounds.” Although that was a better-than-average payoff, art collectors with outstanding instincts can expect to experience successes when they actively seek them out. The trick is in honing your instincts so that you are able to find the investments that are good ones. It is a game of skill, more so than it is a game of chance…
Some collectors have a natural affinity for investing in art. For those that don’t, it’s comforting to know that the skills needed to make intelligent art purchases can be learned and acquired in much the same way that skills for other business ventures can be.
Some tips to get you started:
Buy originals, not reproductions, for investment purposes. Reproductions are great! But in general they don’t make great investments. It can be worthwhile to seek out originals that have been reproduced; when a piece has been reproduced, more people will know about the work and appreciate it. This can sometimes have the effect of making the original more valuable. Keep in mind that not all work reproduces well- for example, highly textural work such as thick impasto oil paintings are best appreciated in their original form.
Invest in artists who invest in themselves. This does NOT mean invest in artists who pay to exhibit in vanity galleries! No, rather, invest in artists who invest in themselves in the sense that they use quality materials; they project a professional image; they have their own web site, a business card, and other promotional materials. They take the business side of art seriously. If the artist doesn’t take the business seriously, why should you take that artist seriously either?
Invest in artists who have goals and who actively take steps to meet those goals. There are no guarantees in life, but those are the artists who are most likely to achieve status in their careers.
Invest in artists who are prolific. While those artists might not be well known by anyone now, those are the artists that, in the future, people are likely to have heard of and recognize. Of course there are exceptions to this, but art history shows time and again that the prolific artists are the ones who command high prices and name-recognition. Pablo Picasso was extremely prolific.
Invest in artists who have found their own unique “voice”. They have a recognizable style and body of work. While each piece should stand alone, the work as a whole will have a cohesiveness that is readily apparent.
Invest in artists who can talk intelligently about their work and who can express their ideas in interesting ways.
Invest in artists who are memorable, charismatic, interesting and possibly even controversial. While this might not seem like an issue (isn’t the work supposed to be the important thing?) it is more of an issue than you might think. People love to be entertained, and people love a good scandal. Do you think Madonna would be where she is today if she weren’t charismatic, interesting, memorable and controversial? What about her music? Isn’t that the important thing?
If you think visual artists are exempt from this, consider again Pablo Picasso and his scandalous love life; consider Paul Gaugin’s outrageous behavior in moving to Tahiti; consider Damien Hirst whose art caused copious uproars and soul-searching.
When it comes to art investments, it is safer to ignore the critics completely and go with your own gut feelings. It’s your money, not the critics’. Keep in mind that Andy Warhol’s soup cans were ridiculed at their first show.
Look at art. And more art. And still more art. Go to museums and galleries. Learn to differentiate between what is “cliché” and what is fresh, unusual, original. Meet and get to know artists, art critics, art appraisers and art historians. You wouldn’t pick stocks by just throwing darts at the Wall Street Journal, would you? No, you’d probably read about the companies, take a look at their annual reports, analyze market conditions, and talk to others before making a serious investment. It should be the same with art. The good news is, investing in art is a lot more fun than buying stocks ever was!
Keep in mind that your best purchases might, or might not be made in traditional venues like art galleries. Purchasing art through a gallery does give you a certain confidence in the art that you are selecting; you have the assurance that the piece was spectacular enough to prompt the gallery owner to risk his/her reputation on it. However, you also pay a proportionately higher price tag for that honor, which makes it a proportionately greater gamble on your part as far as investments go.
Learn to ask questions. Learn the right questions to ask. (I am preparing a separate article on this topic that new collectors will want to read before purchasing art.)
If you’re tempted to think that only the old masters or famous artists are good investments, you’d be dead wrong. That’s because the goal is to buy low and sell high. In the case of the artists who are already famous, you’re usually going to be facing lots of competition on the buying end; buying low is not usually possible. When you start out buying high, it means you have to figure out how to sell even higher- no easy task, even for artists who are in demand.
Financially rewarding art investments, contrary to popular opinion, are often made when the artist is completely (or relatively) unknown. Art history has shown, time and again, that collectors of famous artists are particularly drawn to, and willing to pay a premium for, that artist’s early work. You know, the work that was created before the artist became famous. The good news is that it is easy to find promising artists who are just beginning their careers, and it is relatively inexpensive to become their patrons. It can become mutually financially rewarding for both parties if you are able to find emerging artists that you believe in enough to begin collecting.
Your art collection requires maintenance in 2 areas. Both areas are critical and cannot be ignored. The first area you should vigilantly maintain is a paper trail for each artist that you collect. Ask the artists for their resumes, artist statements, and business cards. If the artists provide certificates of authenticity, keep those as well. Then keep in touch with those artists. Periodically touch base with them and find out what they’re up to. Read their web sites and blogs from time to time. Look for public acknowledgement of their successes; collect their press releases, newspaper and magazine writeups, brochures from gallery exhibits, notices of awards won. This can make a huge impact later on the selling prices of the pieces you own.
The other area that requires maintenance is the actual physical art collection. (I am working on preparing a separate article on how to take care of your original art.) Also keep in mind that art created on archival-quality materials is preferable from a financial standpoint.
Even if you’re not convinced that original art is the best investment for you, you should at least consider making all your decorative purchases original art from living artists. In many cases, you will find that it is less expensive to buy an original work of art from a self representing artist than it is to buy a mass-produced print at a place like Pottery Barn! And while a mass-produced print from Pottery Barn is unlikely to hold its value, with an original work of art there is a possibility that the work’s value could increase if you’ve made a well-considered purchase. Not only that, you will have the privilege of owning a unique, one of a kind original and also the satisfaction that comes from supporting a living artist.
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