How-to: Investing In Art
Demystifying Art As An Investment
Besides being enjoyable or entertaining, art is also considered to be an investment. Why? I’d recommend you visit Sotheby’s and take note of the prices some of those classics fetch – if you can get it right there’s plenty of money to be made. (And you probably won’t mind having it around either…)
Art’s broad appeal is what makes it so powerful – from the magnificence of Michelangelo’s Sistine Chapel to modern art by Andy Warhol, there’ll be something you’ll appreciate –that’s not 100% necessary to invest in art, but it is helpful.
Much of the great art of the world is owned by private investors and financial institutions as a portion of a broad based portfolio.
Are you an Art Collector or an Art Investor?
To clarify the meaning of art as an investment we must first distinguish between being an art collector and an art investor.
Put in the simplest terms, an art collector is generally one who collects art simply because they like it or because they like the artist. An art collector may think of themselves as an investor but the defining characteristic of a collector is that they lack a defined strategy for their investing. They exhibit a more random approach to their art purchases. An art investor will practice a serious, disciplined and well thought out approach to the art they purchase and sell.
Where you fit in of course, is up to you.
What Is A Wise Art Investment Strategy?
In essence, investing in art work is no different than investing in the financial markets; it should be planned with sound diversification principles with a view to reducing risk. Be sure to select art investments that fit your objectives and suit your tolerance for risk. If you feel that you are not qualified to build your art portfolio, it is vital to seek competent professional assistance.
When investing in art, knowledge is everything. If you are selecting your investments you must be well versed in all aspects concerning the type of art in which you invest. For instance, if a particular painting catches your eye and you feel it would be a good investment, before you buy think about why you think it is a good investment. What about the painting makes you think it will gain in value?
A few points to ponder before investing in a work of art:
1. Is it an original, original print or a mass reproduced copy?
2. Even if the artwork is by a famed artist, what period of his work is the artwork from? In other words, art created during an artist’s early, perhaps less skilled period is often less valued than later works.
3. Has the artist shown work at major galleries or is their work included in major collections?
4. What is the subject matter? Subject matters; art depicting socially unacceptable themes are apt to devalue rather than gain in value.
5. What size is the piece? Size may be of importance in some circumstances. If the artwork you are interested in is a small piece by an artist renowned for the excellence of his large pieces, the small piece will normally be of less value than other works by the same artist.
6. Does the artwork fit within your plan parameters?
7. Has it been appraised?
Understanding Appraisals
Appraisals are a tricky subject. When investing in art, demand at least one independent appraisal of the work. Galleries and artists alike are interested in profit. Therefore they are interested in the artwork being valued at the highest price possible. Galleries often get 50% of the sales price as commission so obviously, sales price is critical to their earnings.
If a seller tells you the piece has a verbal appraisal and is worth X amount of dollars, demand a written appraisal before considering purchase. When the seller does have a written appraisal, obtain a copy and study it thoroughly. Take particular note of the appraiser’s name, appraisal experience and qualifications as well as the stated purpose of the appraisal. The appraisal should include the appraiser’s contact information, a disclaimer stating that the appraiser has no conflict of interest in appraising this work and the method by which the appraisal was conducted should be stated.
The Different Types of Appraisals and Their Implications
Be aware that there are various types of appraisals that have a direct impact on the appraisal valuation of the artwork. There are retail appraisals, insurance appraisals and fair market value appraisals all of which will offer varying valuations for the art.
• Retail Appraisal: Retail appraisals reflect the highest dollar value or price that a piece of art sells for regardless of circumstance. Appraisals done by those affiliated with the gallery selling the artwork have a vested interest (their commission) creating a true conflict of interest. They commonly appraise at retail value and their appraisals are generally considered useless by art investors. If purchasing from a private party you should never pay retail price. Artwork purchased from private parties normally sells at lower prices since private parties do not have the high overhead nor high commission charges of a gallery.
• Insurance Appraisal: The purpose of insurance appraisals is to reflect the monetary amount an insurance company would expect to pay if a work of art is destroyed, stolen or badly damaged. This amount generally calculated by considering full retail value plus the costs to repair or replace the work with either an exact duplicate or one that most closely resembles the original piece. Insurance appraisals generally place a higher value on the item than what the item would sell for at retail at a gallery.
• Fair Market Value Appraisal: The type of appraisal that an art investor requires is a fair market value appraisal. Fair market value appraisals value the artwork as the amount a buyer is willing to pay in a normal environment (not a controlled environment as in a gallery) and does not reflect insured value. For instance, a piece of art with an insurance appraisal of $15, 000 may only be appraised with a fair market appraisal value of $1,500. In order to buy art as an investment, it is critical to learn the differences in the types of appraisals.
Fair market value can be acceptably estimated without formal appraisal using the wholesale value of the artwork. This is the price that a dealer or gallery paid to acquire the artwork and does not include any markup or gallery fees. Wholesale value is generally accepted as a reasonable reflection of the fair market value for a piece of art.
When looking at art as an investment, be sure that the appraisal you review for any artwork is not older than three years. The value of art is constantly in flux and as such appraisals must be current to be truly representative.
Investing in art should be viewed like any business investment added to a portfolio. With proper research, constant attention and a broad knowledge base, your art investments may provide you with lucrative gains.
Have fun, and good luck!
Ancient pottery has been found all over Africa. The pottery was both for functional and ritual purposes. In addition to being used to carry water, cook and store food, pottery was also used for various rituals.
African pottery cannot be described in general terms. Africa is a very large, multi-cultural continent; each culture with its own religion, language, politics and traditions. The art, including pottery, of each culture is unique. While the design of a piece of pottery may be similar in some cultures, one culture will make use of it in ritual while another may use it to fetch water.
Many of the sites offer a Fair Trade disclosure guaranteeing that the African artisan is receiving a fair amount for his work. If you’re serious about Africa, I’d really push you to please buy from one of those sites – it’s a world of difference to the people and the culture’s you’re fascinated by.
A vast continent, Africa is home to several diverse cultural and ethnic groups. African figurine design is tribal specific allowing a peek into each tribe’s culture and customs. African figurines are not merely for decoration. Traditionally they were made in the belief that the figurine could bestow certain blessings or in the case of animal figures, they signify certain qualities of character.
