What sorts of things should one put in a portfolio for illustration? Sources say to put your best work and things that convey what it is you'd want a job in. But should there be specific categories as in concept art portfolios (creatures, environments, etc)? Would I have sections for characters, backgrounds, etc for illustration too?
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Depends what you've got and who you're targeting the portfolio to. If the whole portfolio is targeted to one specific market or type of illustration, then you probably don't need subcategories. For instance, if the whole portfolio is targeted to editorial illustration, or if the whole portfolio is targeted towards children's book illustration, there's probably no need to subcategorize.
If you're mixing markets or types, then it might make sense to subcategorize based on market or type. For instance, if you want to show, say, a mix of adult/young adult book covers, childrens' book illustration, and greeting cards, that might be three categories ("book covers", "childrens books", "greeting cards".) Or if you've got a mix of, say, lifestyle illustration, editorial illustration, and reportage, those might be three separate categories. If you've got a lot of the same type of illustration (say, book covers,) but they cover different genres, you might subcategorize by genre (for instance, "mystery", "sci-fi", "fantasy", "romance".)
It depends on exactly what you've got, who you plan to show it to, and how you want to showcase it.