Just outside my office door the other day, LNWM’s Chief Investment Officer Bob Benson was discussing the value of art as an investment. As an avid art collector who’s on the Board of Seattle’s Gage Academy of Art, my ears immediately perked up.
I heard Bob explain: unless you’re truly an expert in the field, it’s extremely difficult to succeed financially when investing in a niche market (which also happens to be illiquid).
Everything Bob said, I whole-heartedly agreed with. I’ve been working around financial experts too long not to have their logic rub off of on me.
Yes, a well-connected dealer who knows the current value of a piece — and can assess its condition and future appeal — has a much better chance of buying the piece low and then selling it high.
And yes, most of us are not art experts. So we end up paying retail and taking an artist’s or a gallery’s word on market value. Not to mention, we don’t have a list of potential buyers at the ready. So if we need the cash tied up in the art, we’d most likely have to sell at a loss.
Bob would never say art cannot ever be a good investment. However, the list of pitfalls associated with investing in art is long enough to make most people walk away from a piece they’re drawn to and wouldn’t mind interacting with every day.
Art Is an Asset
And here’s where I feel the need to come to art-as-an-asset’s defense. Arguments about the societal benefit of supporting artists aside, there is — and will continue to be — financial value in quality art. And unlike a home-entertainment system or the latest “in” car, which usually starts to lose value the second you buy it, art has the potential to hold or appreciate in value, while enriching life for you and those you love on a daily basis.
I think of art in the same way I think of investing in a primary residence. With loan interest and fees, home-ownership doesn’t always pan out financially — especially if you haven’t been in the house very long. Yet there are so many other factors that enter into the decision — easy commutes, not having to move schools, enjoyable neighbors who look out for each other and the potential for fond memories.
The hope (definitely not a given) is that a home will serve as both a good nest and a good nest egg, appreciating enough in value to fund another phase of life or becoming an inheritance for the next generation.
I have the same hopes for my modest but growing art collection. Whether passed along or sold, I’m convinced these pieces will have value when I’m done owning them. And I’d argue that the pleasure I get from seeing a beloved painting every day is just as important as the comfort I get from owning a mutual fund whose market value is widely known and assessed.
I’m not advocating that anyone buy art instead of investing in a 401(k), for example. But I am suggesting that if art brings you pleasure, go for it, and include it among your diversified assets. Not all investments are made for the sole purpose of buying low and selling high. Value has many definitions.