Two decades after his death, Andy Warhol, a larger-than-life artist known for hype and breaking boundaries, might even have been shocked by the recent $71.7 million sale of one of his paintings.

"Andy Warhol has been ranked as the top-selling modern artist in the world," said Tom Sokolowski, director of the Andy Warhol Museum on Sandusky Street. "He had been following Jackson Pollock and Pablo Picasso. But he's now commanding the highest prices on the market."

The Pittsburgh native who became an American legend represents the gold standard of the today's high-priced art market, but when his works were initially bought, their prices were in the mere thousands.

Art as an investment can be very lucrative, and extremely risky.

"I regard art as a hard asset versus an investment," said Sam Berkovitz, director of Concept Art Gallery in Regent Square. "To me, an investment is a purely financial instrument. There have been very few very successful art investors.

"Art tastes are so cyclical. It's harder to pick the next hot artist than picking the next Microsoft. With Microsoft, you can buy and sell the stock any day, whereas the art market is not nearly as liquid."

With interest rates at their lowest in years and the stock market plagued by volatility, many people are seeking alternative ways to store their wealth, including investment grade art.

Art can be a worthwhile investment due to its ability to appreciate over time, even when other asset classes such as stocks and real estate are suffering.

The combined sales from the annual spring art auctions earlier this month at Sotheby's and Christie's in New York brought in $1.2 billion, easing concerns about the health of the high-end art market.

"Last week's auctions [at Christies and Sotheby's] were a big measure people in the art market use," said Laura Niemira, director of KN Gallery in Chicago's John Hancock Center building.

"It left dealers, collectors and gallerists with the feeling that the art market bubble did not burst," she said.

But William Gamble, a lawyer in East Providence, R.I., who specializes in alternative markets, believes that those sales were driven by European buyers attracted by the weak dollar. He said art investors are lucky if values keep up with inflation and that values are highly dependant on fashion.

"There's no guarantee if you buy art by any particular artist they'll be in fashion 20 years from now," said Mr. Gamble, author of "Freedom: America's Competitive Advantage in the Global Market."

He said currently two of the hottest contemporary artists are John Currin, a Carnegie Mellon University graduate best known for paintings with provocative sexual and social themes; and Peter Doig, a Scottish artist whose paintings are among Europe's most expensive.

"You've got to look beyond the hype," Mr. Gamble said. "All markets go up and down."

While the highest-profile art investors are billionaires, and multimillion-dollar art sales often make the news, art investing is accessible to small investors as well.

Ben Crawford, chief marketing officer for MutualArt.com in New York, said what makes art investing interesting is the size of the potential return when a piece is sold, and being able to own something beautiful and thought-provoking that can enhance your everyday life.

"Stock certificates don't have that benefit," Mr. Crawford said. "People should buy art anyway, and it makes sense that they should buy investment-grade art if they are going to do it."

MutualArt.com helps consumers interested in investing in art get educated on artists and types of art. It has an archive of 150,000 articles about art and a database of artists.

"You could buy art by unknown artists, but from an investment point of view, it's a crapshoot," he said. "But if you buy from a recognized artist, the chance of getting your money back is much higher."

Mr. Sokolowski said Andy Warhol's art was a prime example of that.

"The higher price has less to do with his talent and more to do with the fact that Warhol works are immediately recognizable," he said, adding that by the end of his life, Warhol, who died in 1987, was charging $37,500 for portraits.

"Just like owning a Jaguar or Louis Vuitton luggage, when someone sees it, they know you have the money to afford it," Mr. Sokolowski said. "If an artist is less known, the audience who sees it doesn't know its worth and can't put a price tag on it."

For smaller investors who don't have millions to spare for artwork, Mr. Crawford said serious artwork can be acquired for as little as $1,500 with a good chance of appreciating over time.

Any local artist who is getting recognition beyond the town he or she lives in -- especially if that recognition is in New York, London or Los Angeles -- could be a good investment because that artist is probably on his or her way and because of the local connection, it might be easier for an investor to build a collection.

But unlike many other assets, investment grade art cannot be held in an individual retirement account.

"There are very few things that can't be put in an IRA," said Jeff Desich, vice president of Equity Trust Co. in Elyria, Ohio. "Artwork is prohibited from being purchased by a retirement account.

"By not being able to include art in an IRA investors won't be able to shelter the profits. The huge benefit of a self-directed IRA is being able to shelter all the profits."

Other pitfalls of investing in art involve the cost of storing and handling the artwork and creating the proper environment for preserving it. Then, there's the cost of insuring the work against theft or damage.

Phyllis Silverman, a senior trust adviser and vice president at PNC Wealth Management, Downtown, said she recommended investors hold no more than 10 to 15 percent of their portfolio in art and antiques.

Profit should be a secondary consideration when buying arts and antiques, she said. People should buy them only if they enjoy them because they should plan to keep pieces for 10 to 15 years or longer before trying to sell them.

She said it also was important to buy top-quality pieces. Although they're more expensive, they will appreciate more.

"When the stock market is this volatile, people do look for alternatives," Ms. Silverman said. "So there has been great activity in the art market. People are looking for different places to place their money.

"Like stocks, a buy-and-hold strategy usually works best with art and antiques. Market timing rarely works to your advantage."

< Back