Art investments as inflation mitigation? #Moneymondays
This week’s Money Monday is all about information, exposure and education. But before I share this information, let’s agree or concede this basic idea: and that is, the rate of inflation for 2022 is going to decrease the value of your 401(k), other investment retirement plans or significantly impact any acquired gains. So basically the challenge for 2022 is, how do we mitigate the impact of inflation on our income and investments?
If you’re like me, you probably spent time looking at your retirement, traditional investments of stocks and bonds without paying much attention to investing in art and collectables. Now what I found which is worthy of your own research , consideration and investigation is that art and collectables do not always trend in the same direction of stocks and bonds.
While the market has been very volatile this year, collectables in the art world this have been just fine. According to a 2021 survey conducted by Chubb insurance company, interest in investing in art and collectables is increasing. The survey numbers revealed some surprises. Respondents stated if they had the money, 47% would invest in jewelry, watches 32% and classic cars 30%. In another survey conducted in April by Magnify-Money, almost one-third of the people surveyed, stated that their motivation for investing in art and collectable was to make money.
For those of you who are Christian believers, I am not suggesting that you sell off your stock portfolio and invest in art or collectables. That would be like building on sand and not rocks!
Risks in Art Investing
Investment advisors suggest that only 3% to 5% of our portfolio should constitute this type of investment. According to Citigroup, from the years 1985 through 2020, art estimated annualized rate of return was 8.3%; while global stocks over the same period of time return was 9.9% annually. The point here is that the annual return on each investment was quite good for investment.
Investing in art and collectables is not the same as investing in stocks, although emerging trends and technology now allows you to invest or own fractional shares of a painting or a vintage car, just like you would own a stock. These advances mean that you no longer have to be wealthy or rich to own a piece of art or collectables. You can own a piece, or a fractional share and make money on your investment.
Unlike stocks or other investments, you do not make money on art or collectables unless the value appreciates. Given that we are dealing with an unregulated class of assets, the risk is greater.
While shares of Tesla can be sold in seconds or minutes, art is not bought and sold, but more buy and hold for several years. Collectables appreciate. As an example, in April a Hermes Birkin 30 crocodile hand bag, sold for $65,000. Besides the fact that the handbag is overpriced from my viewpoint; if you had owned a piece or percentage of the hand bag as an investment, you made out excellently.
Tax Implications Art Greater
If you view art as an investment asset, the one site to visit is www.masterworks.io . The site promotes that your investment rate of return on contemporary art is greater than that of Standard & Poor / stock market. If you are interested in collectables, then visit https://rallyrd.com. The site allows you to purchase a piece of something vintage or classic. One down side to all this art and collectables stuff is that the longterm capital gain tax is 28% while the long term capital gain tax on stocks is 20%.
The purpose of article is really to expose to some and share with others, a potential or alternative class of assets you may consider in fighting inflation and keeping your head above water in this economy.
Today’s what’s up is about student loans. The moratorium on student loan payments provided during the pandemic , will expire on August 31, 2022 unless extended. It’s probably a good time to begin planning or adjusting your budget to include those payments. And that’s what’s up!
Ruthven R. Phillip, Esq., is a tax attorney, Stewardship and Philanthropy Ministry Assistant, and CEO of Give2Getrich, LLC . Give2Get Rich, LLC 2022. All Rights Reserved. Any distribution or reproduction of part or all of the contents in any form is prohibited.