Art Collecting Is Not Just for the Rich

Walter Manninen read art magazines and started buying paintings in his 20s.

Last year was the seventh consecutive year of price appreciation, Artprice said in its annual art market report. Total fine art market revenue soared 44 percent to $9.2 billion in 2007, "a veritable annus mirabilis for the art market," Artprice said. Sotheby's held a record-breaking $316 million sale in November, and the Mei Moses art index, which tracks a limited number of art auction resales, shows returns grew by more than 20 percent in 2007, which aligned the year with those of the "art bubble years" between 1984 and 1990. But some art-world insiders expect the slowdown will make its mark: Andy Augenblick, president of Emigrant Bank Fine Art Finance, which makes art-secured loans, recently predicted that financial pressures might force some collectors to sell. Artprice reports that prices may have hit their ceiling in 2007.

Art as an investment is still a very new phenomenon. "Traditionally, it was a few people who collected art," says Peter Scott Sahlman, owner of New York art consultancy Sahlman Fine Art. "Art collecting was kind of an esoteric hobby. Now, wealthy people all collect art. It's a social function, too, especially in contemporary art."

Art should make up roughly 5 percent of an overall portfolio, Sahlman says. (Indeed, the Mei Moses index has slightly underperformed stocks over the past 50 years.) The ballpark allocation could increase for someone with a huge fortune. It depends on how much an investor needs access to his or her money, Sahlman says. Art, after all, can't be sold as easily or cheaply as stock.

For art's sake. If all this talk about quantifying art sounds crass, rest assured that some collectors still want nothing to do with profits. New Yorkers Dorothy and Herbert Vogel have become icons in the art community for their landmark collection built through many purchases of reasonably priced minimalist, conceptual, and other contemporary works. The couple—he a retired postal clerk and she a former public librarian—began collecting shortly after they married in 1962.

All told, the Vogel Collection totals more than 4,000 drawings, paintings, sculptures, prints, and photographs. The couple's collecting slowed down only five years ago, Dorothy Vogel says. About 2,500 of the Vogels' works are now being given to museums in each of the 50 states. The National Gallery of Art, which is helping to distribute the collection, won't disclose its value, but it "really has no meaning" anyway, says Vogel, who bristles at the term investing. The couple purchased art to please themselves, she says.

Still, Vogel has advice for would-be collectors who don't have millions to pour out at auction. She suggests starting small with prints and drawings and collecting local artists. "We had no rules," she says. "If it was too big, we couldn't buy it. If it was too expensive, we couldn't buy it." Art should, after all, be a good fit for your budget and your home.