ART AS INVESTMENT

Whether it’s your intention or not, you are making a financial investment every time you buy a work of art for your collection. Even if you have acquired art for enjoyment only, it’s likely that what you own will grow in value over time.

As you continue collecting, it’s wise to consider the longer term. Over the years, I’ve witnessed too many mistakes resulting in unrecoverable losses, tax assessments on heirs that could have been avoided, and massive collections with no remaining “street value.” One collector I know invested $1 million in paintings by a “hot” artist who is now forgotten, which is a shame because my acquaintance could really use that money. (Laurence C. Zale and I have co-authored a report, “The 7 Most Serious Financial Mistakes Made by Art Collectors,” available for free at collectormistakes.com.)

So what will become of the art that adorns your homes and offices? What is your long-term plan? Will your heirs recognize the value of your artworks, or will your “old things” end up mislabeled and underpriced at Goodwill and eBay?

You already have a strategy for your financial investments, so now establish one for your art. Without a plan, you can pretty much expect the worst possible outcome. Depressing as it may sound, you should start at the end of your journey: what will happen after you pass? Do you want to endow your own museum so that your collection — and your name — live on? Do you want to leave the artworks to existing museums? (Note: They probably don’t want most of your collection, so check before you designate them in your will. If you don’t do so, your art may end up in storage, or worse.) Finally, if the collection need not remain intact, how can you help heirs obtain maximum value if or when they decide to sell? Trust and estate attorneys are perfectly positioned to help you pose and answer important questions like these.

Returning to the present, many collectors focus on a single artist whom they believe will grow in value. (It’s easy to learn if an artist’s sale prices are rising.) Buying the best piece from that artist once each year is a great strategy. Of course, what goes up sometimes goes down, so spreading your “risk” is even smarter. (My aforementioned friend later regretted not diversifying his “exposure.”)

If you can, follow and buy from four artists every year or, ideally, even more. (Experts say that buying regularly from 14 different artists seems to be the magic number, but that’s a lot of art!) Always buy the artist’s best work, expect to pay a slightly higher price each year, and be thankful that the artist is indeed growing more valuable.

Like many other collectors, I kick myself for passing on opportunities to buy works by certain younger artists who were selling low at the time. What once brought a couple of thousand dollars can, in some cases, soar to a couple of hundred thousand within a decade. Fortunately, I did not pass on all of them.

So which artists are worth watching? One of our jobs at Fine Art Connoisseur is to highlight artists we admire, and because we don’t run articles in exchange for advertising, you can trust our judgment. You can also learn who’s noteworthy by consulting reputable dealers and advisers.

Though people keep saying the Internet has eliminated the need for galleries, that is simply not true. The best dealers follow their markets closely, know which artists are on the move, and ultimately drive prices upward as scarcity grows, which is a good thing. Building a strong relationship with at least two or three dealers or advisers is critical; you already know that’s true for financial advisers. Though you may pay a modest premium for their expertise (in the form of commissions or mark-up, for example), it will always make a significant difference in the long run.

To me, art possesses significance far beyond financial value, but that doesn’t mean I lack a collecting plan for the present, or for the future.

Disclaimer: I am not a professional adviser and am sharing my opinions only, so I recommend you meet with a qualified adviser soon.

B. ERIC RHOADS

Chairman/Publisher bericrhoads@gmail.com facebook.com/eric.rhoads @ericrhoads

08.29 - 09.23

SUN PRAYER BY ANTHONY WINTERS

DAYS END BY KATHRYN MCMAHON

THE RED DOOR BY JOHN DORCHESTER