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“Artworld of Sherway invites you to consider art as a diversification of your investment portfolio”
Investing in Art (click here for Printable Version)
The Investment Industry and Art The investment field offers many products to help you plan for the future because as we all know, the investment business is profitable for the companies minding your money. One of the investment sectors which is not managed by the investment business is the field of art. Increasingly, sage investors are seeking returns through the placement of a portion of their investment budget in the field of collectible art.
Recognition of Art as a Potential Investment Within Your Portfolio Recently, it appears that the recognition of art as an investment has taken a firm hold because of the exposure provided by regular media accounts of the record breaking prices fetched by many works of art at the sales conducted by the major auction houses both in Canada and Internationally.
World Wide Art Returns for 2007 Last year according to the Mei-Moses art index (a world wide index which has tracked art paintings, drawings and sculpture auctioned since 1875) reported a rate of return in excess of 20% for all art sold worldwide and indeed, rates of return of certain artists have regularly tracked above that rate compounded annually for the past quarter century. Andy Warhol is an example of outstanding returns, as are: The Group of Seven. This compares most favourably with all other forms of investment – and you can enjoy your investment while it compounds your money. A framed stock certificate pales in comparison!! At Artworld of Sherway we recognize art as a unique asset, in that simultaneously, it offers pleasure of ownership and the upside potential of financial performance. Focusing, on the collection of Canadian art, several artists have shown 10 year track records of commendable gains, as reported by the auction houses
For example (taken from the Art Price – Art Market Information): AJ. Casson - (1898-1992) - $100 invested in 1997 in a work of Alfred Joseph CASSON have an average value of $384 in April 2008. JEH MacDonald - (1873-1932) - $100 invested in 1997 in a work of James Edward Hervey MacDONALD have an average value of $1026 in April 2008 Franz (Frank) Johnston - (1888-1949) - $100 invested in 1997 in a work of Franz Hans JOHNSTON have an average value of $461 in April 2008 Fredrick Simpson Coburn - (1871-1960) - $100 invested in 1997 in a work of Frederick Simpson COBURN have an average value of $1143 in April 2008 Frederic Marlet Bell-Smith - (1846-1923) - $100 invested in 1997 in a work of Frederic Marlett BELL-SMITH have an average value of $348 in April 2008
What to Buy – A Daunting Task?? Buying any form of art can seem like a daunting task. Which artist to buy, where to buy, how to structure the financing, what if any are the tax considerations, who to insure it with, how long to hold it, what expectation should be established for a rate of return, and other similar questions immediately come to mind.
Borrowing a phrase most often used by the legal community, Artworld of Sherway suggests you treat the purchase of a work of art for your portfolio like any other investment. Due diligence “pays”off!!
Your decision to purchase will require a degree of self education and the choice of a well established source with years in the business. The source will provide options for you to consider in making your decision on how best to diversify your portfolio, so that you may enjoy your selection while still having the upside prevalent in the long term price movement in the art market.
At Artworld of Sherway we offer the following advice:
Learn before you invest. Train your eye. Visit museums, galleries, auctions, websites and art fairs to educate yourself on what you like or dislike. If you are considering a living artist, attend an exhibit where the artist is in attendance. Speak with the artist about their life, work, and concept of what their painting means to them. If the artist is not living, attempt to gain the same sense of the work by reading books or by research on the web.
‘Like’ the piece you buy. Feel comfortable with the fact that you will likely have the work for the medium to long term. It may be passed from generation to generation – in some cases without attracting a tax burden. The quality and value of artwork must go beyond decorative appeal.
The artist’s standing in the art market is important. A Van Gogh is worth more than a Casson – everyone is aware of that, however, since most will never own a Van Gogh, before making a decision the standing of the artist you are considering should be firmly established. Determining the collectability of an artist is where a gallery can help you. Important factors that determine collectability and value of an artist’s work are; training, teachers, education, past shows, exhibition record, and the repertoire of collectors. The artists’ style is also important. Has the artist maintained a consistent style or has the type of work completed, drifted as time went on? An artists’ change in direction does not automatically mean that there is no value to works in the new style, but the market will usually consider a work for which the artist is best known more valuable, than a work which shows a departure from the most popular style. Try to buy a work that demonstrates the highest ‘quality’ from the artist or medium that interests you.
Buy the Best Within Your Budget Range In some cases, the value of a work from an artist that has passed on is higher than that of a living artist. This is a point to consider, however quality works by a living artist can give you a broader option in price and availability. Usually the selection of available works from a non current artist is severely limited. This is normal since there are always fewer works from which to choose and quite often little room for price negotiation. And finally, consider your true cost including loss of use of the money you invest, or if some borrowed funds are used, the cost of those funds and the tax treatment of the interest. In the case of Artworld of Sherway, we will accommodate your interest by being able to offer an interest free payment structure that is tailored to match your free cash flow.
Notwithstanding the advise provided above on the quality of the work and buying the best you can afford, one niche in the art market that is potentially an anomaly is the purchase of a drawing, a sketch, or other such form from a well known artist. Often these works may be purchased for a fraction of what the mainstream works demand, and therein lies the opportunity and the dilemma. The upside may be much higher than thought, but the market does value items as the market sees them. So, proceed with caution, but in some cases, this type of purchase can be extremely rewarding.
With respect to possible tax benefits, please speak to your investment advisor or tax accountant as there may be some opportunities from which you can benefit.
What should be of major concern always, is the provenance (the paperwork, markings, signature, and other indicators) of the work being considered. Check the work for it’s as complete as possible history of ownership, condition, and other indicators of the authenticity, prior to commitment. One of the more reliable ways to do this, is to always deal with reputable organizations. Artworld of Sherway is proud to stake it’s reputation on the works we sell. In nearly 30 years in the business, we have not had one piece returned over a question of authenticity. If we are unable to track the lineage of the work to our prior satisfaction, the work will never be sold by Artworld.
And Finally – Where to Buy and What is a Fair Price to Pay? From time to time, one of our customers comes into the gallery excited at the prospect of framing a wonderful piece of work they have purchased – spontaneously. Too often, it looked like a bargain – and too late – they bought it. In some cases, the work purchased was fine and the price paid not unreasonable (but seldom the bargain they were led to believe they bought). But too often, lack of thought and spontaneous purchases end up being a waste of money. We caution our customers to not act spontaneously and to know the provenance of that which they are about to buy. In many cases the manner in which these sales are conducted are deliberately done to prevent you from being able to do your ‘Due Diligence’ and in short you end up with a work for which you grossly overpaid or even worse – a fake. We have seen it all, and this is written to alert you, once again, to always carefully consider your purchase before you make the commitment. The chance of finding a Renoir at a garage sale is about the same as winning the lottery. It does happen, but the odds are not in your favour. Although it may seem a bit dull in comparison to the excitement of ‘really getting a bargain’, the Group of Seven works and Morrisseau bought from local galleries and at some of the auctions 20 to 50 years ago have rewarded their owners with their presence and quite as an understatement, increased the owner’s net worth significantly over those years. Buy from a source that has experience in the field and that you trust.
Artworld of Sherway strives to provide you with the highest quality works of art at prices that are more than competitive with any current market value – galleries or auctions. Our goal is to ensure that each work you purchase will prove to be a valuable addition to your collection and to your investment portfolio. Our experienced gallery team are always available to assist you to acquire that ‘special work which is suited for your collection and investment portfolio.
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