Is art a good long-term investment?
If you’ve ever thought about investing in the art market, you’re not alone. But how viable is the art world for long-term investors? In this segment of Backstage pass, recorded on December 20, 2021, Fool contributors Jason Hall, Toby Bordelon and Rachel Warren discuss investing in art and Masterworks, a start-up that allows retail investors to own a slice of a famous work of art with seed capital as low as $500.
Jason Hall: Toby, you’re an art guy.
Toby Bordelon: I am. I’m actually very interested in art, in fact I just bought a few new things yesterday from a gallery in Alexandria, Virginia where we used to live and love. But you know, I’m actually not interested as an asset class.
Personally, I don’t think that’s the right way to approach it. My wife and I buy art to enjoy, we buy things we want to look at, and I absolutely don’t expect anything I buy to be sold for a profit.
I just guess it’s stuff I enjoy, stuff I want to have, but it’s consumption, it’s not investment, right? That’s my problem with Masterworks, which is a good idea. I love the idea, but that’s the way it is.
If I put my money into a work of art, I want to be able to look at it and have it on my wall, or at least have a way to enjoy it. Now maybe if they could combine that with the NFTs somehow like everyone who invests in a painting gets an NFT I don’t know I can still snag a picture at the wall, so…
Rachel Warren: An NFT.
Room: In fact, I listened to a few interviews with some of their leaders. They’ve been on a few podcasts that I listen to. They’re like, we don’t touch digital art. We don’t understand it, we are not.
Bordeaux: Yeah. I wonder what I get, it’s an investment. I put money into a painting that I hope to sell for a profit, but that’s not my approach to art.
Room: This is exactly the approach they take. I think it’s something interesting the way they do it. Because they focus on the areas of art where they see, where there have been the best recent returns, but also where they see a clear demand for that type of art, and they try to buy quality art, I guess that’s the good —
Bordeaux: I can see myself being an investor in the company and it’s interesting, I want to see more of it, but I don’t necessarily see myself as a customer.
Room: I love this Toby. I think that might be more fun.
Warren: Oh like if they go public, yeah that would be cool.
Bordeaux: Yes indeed?
Room: You know, what I think, I’ve been convinced for a while, but I’m pretty sure that’s the way it is, I love art, I want all art. I need to find a business where other people will buy art for me [laughs] Basically yeah–
Warren: I mean, if it was.
Bordeaux: Do you think he’s just sitting in his office surrounded by all these Picassos and Monets and such. As it is quite sweet.
Room: Why wouldn’t it be? [laughs]
Bordeaux: It’s just. It’s just.
Warren: Who wouldn’t want that? I don’t know, I feel like it depends a lot on your goal to invest with this platform. If you’re like me, I focus on building my long-term portfolio, I focus on stocks.
But I’m also very interested in art. I love the idea of owning a piece of history or a bit of it. To me, it would be more like a fun thing, not so much something that I would at least initially expect to profit from, but a fascinating business model.
Room: I think it’s a great way to scratch that itch at your point. For me, investing should not be limited to making money. This must be an important part of it, but are you learning? If there is an area that really interests you, it is worth checking it out, I think so.
Bordeaux: Now the other thing, too, that I think we should point out, we started this thread with a comment on Christie’s Auction House and their banner year.
I think it has a reputation of being a place where they sell these million dollar coins that are out of reach for normal people, but they do auctions where they sell coins that cost a few thousand dollars. If you are a normal person, you can go to their website, you can watch the upcoming auction, and you can watch something you might be interested in.
You may have some of those old paintings. I think they’re having a 19th century art auction in a few weeks. Some of the estimates range from $5,000 to $10,000 to $20,000.
But still expensive, but not like beyond the level of modern art by current living artists that you could buy, depending on who they are. It’s not just those headlines looking at what sells for $15, 20, 30, or 50 million.
It’s like things that a normal person who loves art might be interested in. It’s something to check out, I think.
Room: That’s great. I think for me, this asset class doesn’t fill a bucket that I feel like I need to fill in terms of thinking about uncorrelated assets. We are talking about Bitcoin with inflation.
Bitcoin is for me the protection against inflation, that’s how I think about my portfolio. I don’t know, I just think real estate is an asset I’m more interested in because it’s one that I can see generating income, that sort of thing.
Very interesting, no doubt. Unless my son is very interested in art, which is possible. I have a feeling that the art my wife and I acquire is just a bunch of stuff he’ll have to get rid of at a garage sale when we die. [laughs]
I think that’s probably going to happen. We buy things like art, I love buying things from local artists that I can talk to and hear their story about art that I think is cool, and that’s good enough for me. Maybe I’ll be Toby, rich one day and I can buy expensive art then. Toby doesn’t answer. [laughs]
Bordeaux: I answer, Jason. [laughs] My art is not expensive. Hey, you know what? And if you’re saving your money, if one of these many companies that you’ve invested in is meme, you want to come out on top and you’re going to buy yourself a $5 million coin at Christie’s or something.