Art as an investment?

[Rogar]

I'm a traditional conservative when it comes to investing, but probably like everyone else have been a little discouraged lately. I was rolling the idea around in my head about getting just a little more diverse by getting some sort of art or other collectibles. Probably not something a person just dives into with a little study, but I have the time to do a little research. Not only would you have an investment, but something to enjoy.

Has anyone else thought about this or have ideas on some things that might deserve a little more study? I know it's probably a risk and would go whole hog into anything, but it could be a fun project.

[SteveinMN]

Well, there are art-investment groups -- kind of like mutual funds for art investment, though i could not say how liquid they are. A Web search of group investment in art will yield the names of some organizations about which you could learn more.

But -- and I say this as an artist myself -- the value of art is so highly subjective and discretionary that it's hard to consider it as an "investment" in the sense of equities or real estate which have a fundamental asset backing. You can find a majority of knowledgeable people who would agree that General Electric makes a fine locomotive and Schaffenberger produces excellent chocolate. But there are materials and labor costs which function as a base for the price of those items. Art is not moored to those costs. It costs me just as much to produce an excellent photograph as a crummy one. And what one will sell for has only the loosest connection with the cost of amortized camera gear and time spent on the image (and marketing it) and media printing costs. And for any piece of art that someone will swoon over, someone else will find it jejune claptrap.

I buy art and I enjoy it. I never consider it an "investment" in the traditional sense. But if it's something you're interested in doing, I would do it as part of a group. I think trying to do it yourself is just too much of a throw of the dart.

[iris lily]

Our friend has been collecting art, keeping it, and selling it at the right time for decades now. His stated goal is to show that a middle class person can have a nice art collection, you don't need to be a billionaire. He sold his Warhol Queen Elizabeth and made a pot of money on it which he turned back into new art for his walls. We all got to see it for years before it went back to New York. He had a Dali menorah that I loved, but he didn't have that for long, it wasn't his style.

The bottom dropped out of the art world with the US economy crashed. It's hard to make any real money. My friend uses a private dealer who works out of her home. He reads a lot, gets all of the art magazines. His niche is contemporary art, he doesn't jump all over is style or periods. He has a lot of art on his walls and a few sculptures.

[ToomuchStuff]

"Collectibles" is another name for those dust catchers that are mass produced and sold with the idea "that they go up in value over time", when the reality typically is the ones who want them, buy them when they come out and they are sold for pennies (if not given away) at estate sales, (since the owner has passed waiting for the value to rise).

Steve said it best on the art market (which is currently down). Unless you have a good amount to invest in some famous artist, who you find a NON FORGED work at an estate of someone you know, with the provenance to back it up, it is similar odds to gambling. There are a lot of fakes in the art world, and you really need to know what to look for and at, before investing in it.

[jp1]

Not Even getting into the financial risk i'd be concerned About physical risk and the cost of insurance. Keeping your investment in your house is fine until your roof leaks on it or your idiot neighbor blows up half the block to collect insurance on their underwater house.

[Rogar]

Yes, good thoughts. Thanks. I was thinking beyond the things you would pick up at garage or estate sales and eBay and more things like you might get at a Christy's auction. For collectibles, maybe rare coins or oriental weaving. And certainly anything would have to be documented and insured.

I've been a fan of the photographer of American Indians, Edward Curtis, and have followed his print prices for several years. He more popular prints have increased in value significantly over the last ten or fifteen years. The less popular have stayed the same or gone down. In a depressed market maybe it is time to buy?

Anyway, I'm not quite convinced of doing this yet and appreciate thoughts.

[try2bfrugal]

There was a story in the news about a middle class couple who amassed a museum worthy art collection. The probabilities are though that for most people art collecting is more of a hobby than an investment. But look at it this way, vacations have zero resale value once they are over, so if you enjoy art collecting it may net out to be a cheaper hobby than some others, because art usually retains at least some kind of residual resale value.

I know one of the simple living ideas is to spend money on experiences, not things, but I feel pretty much the opposite. I think there are many fun experiences that are free or at least really cheap for us, like hiking through the Redwoods, gold panning or going to a museum with a free library pass. With an art collection in your home you can look at it every hour of every day, and resell it when you want to for at least a partial recouping of your money. I think it is pretty hard to actually make a lot of money on collectibles, though, because you are often buying at retail prices (plus tax) and then selling at wholesale prices and taxes on top of that, if you do make any gains. If you have an expensive collection then you have to pay for insurance, too, or if you have more than can fit in your house you have to pay for storage.

One way you might make money is to set your hobby up as a small business, and then deduct as business expenses your mileage to galleries, trips to museums, health insurance premiums, cost of art, books on collecting and related expenses. But you would probably have to show a profit before too long or find some other way to convince the IRS that you had a real business and not just an expensive hobby.

[ToomuchStuff]

http://www.pbs.org/independentlens/h...othy/film.html This is a good watch if it comes on PBS again. This quote "They bought art, only because they liked it and for keeps" is the key. IMHO, IMHE.

[SteveinMN]

Yes, good thoughts. Thanks. I was thinking beyond the things you would pick up at garage or estate sales and eBay and more things like you might get at a Christy's auction. For collectibles, maybe rare coins or oriental weaving. And certainly anything would have to be documented and insured.

There was an article in the newspaper not long ago about how the market for "Oriental" rugs is falling because many fewer people want to decorate rooms around them and because even those who do, tire of the look after a few years and want to sell the rug for whatever they can get for it. This has put the makers (and owners) of expensive hand-knotted rugs at a significant disadvantage because people are buying machine-made rugs available new for a fraction of the cost of hand-knotted. Another example of an expensive collectible around which life itself has changed.

Collectibles are also a bit of a minefield because you really need to know what else is out there. Antiques Roadshow is an excellent example in that sometimes an item will have great value despite repair or missing parts simply because it is so rare (relative to identical items still in existence) -- and sometimes a repair or a missing part will pretty much relegate the item to "family heirloom with sentimental value" because there are enough identical and pristine examples in existence. Without knowing the market intimately going in, you could really overpay for something that will never brings back what you hope it will -- while you pay to store, insure, and maintain it.

Finally, when you look at other markets, the big money is not made at the top of the curve. By the time items show up at Christies and Sotheby's to attract a worldwide buying audience, well, if you buy and hold, you might make some money. But just as stock pickers do not always stick with the Dow 30 stocks for maximum gain, your better chance comes with doing what Iris Lily's friend did -- picking carefully or picking artists or pieces which develop a following (and don't already have one).

I've been a fan of the photographer of American Indians, Edward Curtis, and have followed his print prices for several years. He more popular prints have increased in value significantly over the last ten or fifteen years. The less popular have stayed the same or gone down. In a depressed market maybe it is time to buy?

It is time to buy only to have those items within your view to enjoy. Can you say why some of his prints have increased in value and others have not? If the reason(s) seem capricious to you, then I'd keep this as an enjoyable hobby and not as a way to diversify your investments.

If you really want to get into this area and are willing to gamble some money, your best bet may be ephemera -- items designed to be consumed or which, by nature, will get beat up and, eventually, discarded. For example, kids' lunchboxes back in the mid-60s with a Beatles motif were no more expensive than lunchboxes with a Smokey the Bear motif, but their value has held up much better because of continued interest in the Beatles. Autographs of current celebrities might be worth more in the future assuming the signature is personalized, kept properly, and documented, and the personality turns out to be a big star. Of course, you still have to buy and hold, but it might be worth devoting a little space and enjoying the game of picking winners and losers.

[Mrs-M]

I see nothing wrong with the idea, providing your portfolio allows you to "sit on it" for a while. I tend to believe returns on such investments curtail much higher yields, the higher the priced item is (from the start), and how significant the item(s) is/are on the antique/collectable world stage.