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Entrepreneur, May, 1997 by Elsie Marienberg

Are bouncing bond prices driving you berserk? Spiraling stock prices scaring you silly? And you're certain you don't have the stomach for pork bellies and frozen orange juice futures? Where else is an investor to go? Collecting art can be fun, interesting and a great way to diversify an investment portfolio.

Though some people collect art solely for investment purposes, most experts agree that the best way to invest is to buy something you love. That way, whether it appreciates in value or not is immaterial; the pleasure of its company will be enough.

Of course, it is possible to make a killing in the art market - that is, if you can predict what new artist will become the next Jackson Pollock or find a Dutch master at a yard sale. While the chances of that are slim, and not all investors can afford to purchase a Monet or a Mondrian, you can still get a lot out of collecting even if you don't have a few million to toss around.

* LOVE AT FIRST SIGHT

The best collections are those put together by art lovers with a passion for their subjects. Whether it's Venetian glass, Egyptian pottery or Chinese porcelain, before you go on a buying spree, do your homework. Experts suggest your first purchase should be books on the subject that interests you.

Select one area and focus on it. Spend some time visiting museums, galleries, auction houses and dealers to get a feel for what's out there. Take note of what catches your eye and why. Join local museums, and take classes to help you develop your eye.

When you're ready to purchase, think of it as you would any investment: You wouldn't buy without reading its prospectus, checking up on its track record and knowing whether its style will fit in your portfolio.

Beginning investors should work with a dealer to be sure they're getting what they pay for. Before buying, make sure you're getting the most for your money. Novices should avoid buying damaged works or those whose origin is in doubt.

Your initial foray into collecting doesn't have to involve oil paintings. Works on paper are usually less expensive and easier to resell. Some collectors prefer ethnic art, such as Mexican pottery, American Indian kachinas or African masks. When you do buy, be sure the piece is what the vendor says it is, not some recently mass-produced mask masquerading as an ancient tribal artifact.

"Appreciation potential has to do with the level of art you're purchasing," says Jerald Melberg, owner of the Jerald Melberg Gallery in Charlotte, North Carolina. "You may buy an unknown artist's [work] for $1,200, he hits it big, and you've got it made."

But most dealers and serious collectors agree: If you spend less than $10,000, you may have a work of art, but you don't have a financial investment. Melberg notes that six figures is usually the low end of investment-level art. Buying art on this level is like buying blue-chip stocks: There's a lot more chance that it will appreciate than the work of an unknown artist . . . or the stock of an unknown company.

However, any honest dealer will tell you that appreciation is not guaranteed, and just because prices have risen in the past doesn't mean your purchase will be worth a fortune later. The warning should sound familiar to any investor: "Past performance is no guarantee of future returns."

* NOTHING LIKE THE REAL THING

Picture this scenario: On vacation, you wander into the gallery of an upscale dealer, where you find a great buy. Putting your research to work, you're sure this Miro aquatint is the one you want. The dealer even provides a certificate of authenticity, so obviously it's the real thing. At home, it looks even better on the bedroom wall, and you admire it every night.

Sound like a dream? Well, this supposedly astute investor (me!) has now retitled the work the "Fake Miro." While the signature looked genuine and the certificate of authenticity from a supposedly reputable dealer seemed to be in order, the $800 invested would have been better spent on a blue-chip stock.

What can you learn from my mistake? Before buying, ask for the history of the work, including who owned it before you and where it was purchased. Unless you're buying directly from the artist or from a gallery that specializes in a particular artist's work, make the gallery agree to take the piece back if it turns out to be a fake. Many galleries will allow you several months to have a piece authenticated. Take it to a museum or an expert in the field to get a professional opinion. They usually charge a fee, but it's worth it.

In some cases, you may end up with a fake, even after expert certification - and you won't be alone. In a recent show titled "Rembrandt, Not Rembrandt," museum director Philippe deMontebello explained how even experts can mistake a fake for the real thing. If the Metropolitan Museum of Art in New York City can be fooled, so can you.

Buying a fake can be a useful lesson - one that, hopefully, won't cost you a fortune. After all, I still enjoy my "Fake Miro" - and until now, I was the only one who knew it was a fake.