How to make art part of your investment portfolio
Who doesn’t want to include high-priced art in their portfolio and call it an investment while enjoying its magnificence over the fireplace? Top-shelf fine and contemporary art, aka “Bluechip art,” with prices starting at $1m per piece is out of reach for most people. However, the potential return from investment is matchable only to that of a successful technology startup.
The fine art market return outperforms the S&P 500 by 10%^2 annually, with seemingly less volatility. Banky’s “Red Balloon” sold for $1m last year after being shredded live before the crowd, suddenly increasing its value x10. Leonardo da Vinci’s “Salvator Mundi” was acquired before restoration in 2005 for less than $10k and was recently resold at $450m.^1
Low and middle market art, priced at $100 - $50,000, $50,000 - $1m, respectively, may be more obtainable yet the return isn’t nearly as high as from resold BlueChip work. Newly forming art funds that pool investors’ money to purchase BlueChip art is coming to market. A purchase of a piece by Monet for $10m wouldn’t be done alone by the common investor, but as a shareholder, an investor may now own a small percentage of this valuable piece of work and share in its future profit when sold. Obviously, displaying it in a secret, secure location, managed by the investment firm would be necessary. There would be no enjoying this work over your fireplace.
If you’re an art lover who wants to enjoy the work then you may still benefit from a return on your investment. Your art broker should tell you more than just what’s hot in the market. It’s necessary to look at the strength of the secondary market, how often the work has traded hands, and the pricing of similar works by the same artist. If you’re a business, like with furniture, it may be possible to deduct the art for your office for tax purposes but you’ll want to work with your tax advisor to map out a strategy.
At Eureka Wealth Management, it’s more about stocks and bonds. For art lovers, I’ll help you include the works in your portfolio and analyze the potential for investment return. I also do your retirement plan, strategies on insurances, estate, and taxes. Call for a free initial consultation at (760) 537-0791 or online at eurekawealthmanagement.com.