Art Appreciation vs. Financial Appreciation Item Number: 01132010 $0.00

DescriptionAlthough I have written about this subject in the past, I have never done so after a period of such huge economic decline. Now that it appears the US, and the remainder of the world, may be taking its first tentative steps toward an economic recovery, perhaps it’s time to revisit this very important topic – Invest in art for its financial potential, or invest in art for the enjoyment? I say BOTH!

I can remember, probably 5 years ago, discussing with a client which piece he should buy. Naturally, he was most interested in making sure that whatever piece he bought that it needed to be worth more to him or his estate in the future. We discussed how well Greek Attic and fine Egyptian antiquities had performed over the last 10 years and how they were likely to continue to see strong future growth. But I stressed to him that no matter what he bought, this piece was something to enjoy now, and no matter what he bought if he did not like the aesthetics, he would not be happy – now or in the future. Five years later, he tells me he still owns the piece and couldn’t be happier.

Because most of our clients do not invest in art to speculate on its future financial return (not that they don’t have the resources, but because their investments are in different arenas) I have established a set of rules that we might offer:

Rule #1 – Buy what you LOVE! Yes, some pieces will outperform others in their return, but once you take into consideration the value of the enjoyment you have received from looking at that piece over a long period of time, does it really matter? Say you paid $5000 for a piece that you absolutely adore, and pass on another that just didn’t move you. 10 years later your piece is still worth $5000 and the one you passed on is now worth $7000. Wasn’t the enjoyment you got out of this piece worth $200 per year to you? That is a rhetorical question, but if you answered “no,” perhaps art is not what you should be investing your money in!

Rule # 2 – Art should not be your main form of investment. These last two years highlight this rule perfectly – and in many cases painfully. There is not a day that goes buy when we do not receive a phone call or email asking if we would buy this collection of art, or this piece of art. Sadly, we can always tell when the person on the other end is desperate. Some of our best purchases over the last year have been from people who need to sell their ancient art to make a house payment, or a loan payment, or have some other financial obligation. And in virtually every case, we have not set the asking price – the seller has! Art is not liquid, and in most instances, if you need to sell quickly, you will not like the results! Jerry Eisenberg at Royal Athena writes on his web site that art should be no more than 10% of your financial holdings. Sounds about right to me!

Rule # 3 – Buy the absolute best quality you can – not necessarily the most pieces. I often speak with other dealers to get a pulse on what is happening in their world. Universally, we have all seen a flood of low-quality objects hitting the market, and have seen resulting prices for some of these pieces plummet. Again, no less than once a week we are seeing offers of Peruvian blackware vessels – as are almost every dealer of Pre-Columbian art. Fine quality examples still sell just fine, but your run-of-the-mill stirrup jar with little decoration can now be bought at prices less than 10 to 20 years ago. Good quality is always in demand!

In almost every case, FINANCIALLY, should you have $10,000 to spend it is better to buy one $10,000 piece than 10 $1000 pieces. And we can tell you from an art appreciation standpoint, you are much more likely to enjoy/keep/cherish that one piece and quickly want to dump several (all) of your less expensive pieces.

There will be more rules to come, but in summary, buy what you love, love what you buy, don’t overexpose yourself with your art and buy the best example you can afford! Good rules to live by, but do what feels right to you! Remember, life is too short to live without art!

Questions? Comments? We'd love to hear from you!
Bob Dodge