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Published in the Columbia Daily Tribune 4 December 2005

Investment Grade

Every so often, some enterprising free-lance writer will do a piece for one of the big financial publications, or even in the mainstream press, about investing in art.  Or maybe an editor will assign a reporter the task of checking into the high return on great art, because some Picasso just sold for $47.3 million at auction.  And before long people all across the country who read these papers or come across the article will walk into a local gallery and ask someone there "what's the best piece to buy as an investment?"  I simply cannot tell you how many times this happened to me and my staff at Legacy during the 8 years we were in operation.  And it still happens to me in a somewhat more indirect way these days.

Like it just did.  From Phyllis Furman in the New York Daily News comes "Art can be a better investment than stocks - if you choose carefully" (which can be found here for free, if you want).  It discusses how art investment outperformed stocks in recent years, and how there's real money to be made in contemporary art.  Here's the money quote, just the second paragraph in:  "The art market is hot.  Prices, especially in sizzling areas like contemporary works, are rising through the roof.  Sotheby's is reporting big sales gains.  And investment banks, eager to reap profits from paintings, are launching numerous art investment funds."

Whoa.  No wonder people get the idea that buying art is a Good Thing for the portfolio.

Now, to be fair, Ms. Furman does go on later to explain that art is a risky investment, that these are high-end works by well-established artists, and that art is neither as liquid nor as dependable as conventional securities, and that there are real costs (in terms of transactions, insurance, and even routine care) associated with art.  She's done her homework, and good on her.

But I know that some people will only read the first bit, or that the part that will stick will be the part that says that art can outperform just about any other investment.  And I know that some galleries and some artists will tout art they want to sell to the unsuspecting public as "investment grade."  I've seen it happen with my own eyes, heard the pitch with my own ears.

Folks, it just ain't so.  Yeah, there's money to be made in buying and selling art.  Otherwise places like Sotheby's wouldn't exist.  And there are some investment portfolios which include art.  But we're talking the real upper end of the spectrum here.  Works that sell in the six- to seven-figure range.  And don't be mistaken, when someone says "contemporary art," that doesn't mean stuff done by your neighbor last week.  It specifically means works from 1970 - 1985.  Works after that are considered "very contemporary," and that's barely considered investment grade by the big dealers, since it is so much more risky.

Trying to push off art done by even very talented people (who don't happen to be famous) as an 'investment' is unethical, at best.  The chances that a work you buy at a gallery while on vacation someplace will appreciate in value are on a par with hitting the lottery:  sure, it happens, but that's no way to plan for retirement.  The big problem is that there is very little market for the resale of art.  If someone tries to tell you that a work will appreciate in value in the coming years, ask them if they'll be willing to buy it back from you at the price they want you to pay right now.  If they say yes, get it in writing.  But they won't.

The only reason to buy art is because it appeals to you, because it will enrich your life by having it in your life.  Jennifer Perlow, co-owner at Poppy Fine Art agrees that for the average person, looking at art as an investment is the wrong way to go:  "I believe that you shouldn't buy art because you think it will gain in value.  You should buy art that speaks to you, that way no matter what the monetary value of the piece it is always valuable to you."

That's wisdom you can bank on.

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