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(Don’t) Invest Like the Super Rich Elites

Chris Campbell

Posted May 26, 2021

Chris Campbell

Want to invest in the “elite tangibles” market?

Probably shouldn’t. But for kicks…

Consider old wines, like this one below.

You can grab it for less than $100,000 per case…

wine brand

Or vintage watches, such as this 1989 Ulysse Nardin Astrolabium going for $24,500…

watch close up

There’s also precious stones. Jewels. Classic cars. Yachts.

You name it.

But before you jump in, there are some things worth knowing.

A vintage watch can take, on average, up to six years to sell. The vintage car market is surprisingly volatile and fickle, rising and dipping dramatically.

It’s unlikely anybody’s going to buy that wine from you if your store it at home. Your best bet is warehouses like London City Bond or Octavian Vaults to ensure your wine holds its value (but maybe not given the expensive warehouse fees).

Truth is…

99% of the time, investing in the “elite tangibles” market is a horrible, no good, mighty awful idea. (Even if you’re a billionaire.) It’s mostly just wild status symbol speculation.

That said, there are exceptions.

There’s one asset class within this arena that’s highly uncorrellated to other asset classes, making it great for diversification. And, with the rise of distributed technologies, there’s a simple and affordable way for you to gain exposure.

By leveraging the rise of fractional ownership, you can invest like the elite… without actually investing like the elite. (And still grab some bragging rights.)

ART.

Over the past decade, financiers, celebrities, and royalty have been piling into New York and London auction houses in droves.

Steve Martin’s got a Picasso, a Georgia O’ Keefe, and a Roy Lichtenstein. 

Brad Pitt picked up a Banksy.

Elizabeth Taylor has a Van Gogh.

Steven Spielberg has a Norman Rockwell. 

Leo DiCaprio owns about $10 million worth of art.

I don’t usually care about what the celebrities are up to (as in, precisely never), but this trend is one worthy of your attention.

Art is one of the oldest asset classes on earth. And it’s not going anywhere. Sotheby’s is 275 years old and still kicking. (It’s also, fun fact, the oldest company on the NYSE.)

According to Coutts, the 300-year-old wealth management business, art has a place in every serious investor’s portfolio. Their research revealed that art provides a “good inflation hedge” over all time horizons. Furthermore, low and even negative correlations with equities and fixed income show that art is generally a great way to diversify.

graphs and charts colorful

Source

Also, consider how the art market, invested in wisely, allows you to leverage the Cantillon Effect. French economist Richard Cantillon observed that the first recipients of the new supply of money are able to spend before the prices increase, instigating further inflation.

While the money supply keeps expanding, those closest to it aren’t just sitting on cash, they’re parking it in assets… the rarer the better.

You can’t get much rarer than “investment grade” art. Picasso isn’t making any new paintings. Da Vinci retired a long time ago, too. The supply will never meet the demand. Furthermore, investment-grade art has a growing collector base around the world, especially in emerging markets. It’s a truly global market, not linked to any specific currency.

Personally, I love the idea of investing in art…

Why? Because the winners in the next decade will be those who hold assets. Art is yet another interesting way to diversify, preserve, and grow your wealth.

But, if you’re like me, you’re not interested in plowing through research on art investing, throwing a bunch of money into a painting, and then worrying about it catching on fire every day for the next 10 years.

Enter Masterworks 

Masterworks offers fractional ownership in some of the most popular artists throughout history.

For as little as $1,000, you can invest in fractional interest in individual paintings with a few clicks of a mouse… and not have to lift a finger otherwise.

If you want, you could, for example, buy $500 in shares of a Monet and $500 worth of a Picasso and $500 worth of a Basquiat. 

The downside? You don’t get to choose when to sell the painting. The Masterworks team sells when the right offer comes in. When Masterworks sells the painting, you receive the proportionate amount based on the amount of shares you own

(But, that said, you’re not locked in. If you want to sell early, you cansell your shares on a secondary market.)

Masterworks has the best experts in the art market curating art most likely to appreciate in the coming years based on:

→ Global collector base 

→ Artist appreciation rate 

→ Demand for the artist 

→ Risk and volatility of art/artist market 

In short, Masterworks does the work for you.

Do I think you should plow in and pray? No. But I do think Masterworks offers a great way to diversify your portfolio. (Full disclosure: As affiliate partners, we benefit if you do.)

Until tomorrow,

Chris Campbell
Managing editor, Laissez Faire Today

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