Welcome back to the Net Worth Podcast.
Speaker 1: This week we are diving into a truly fascinating topic.
Speaker 2: How fine art can be more than just something beautiful to look at.
Speaker 1: It can be a powerful engine for building and preserving your net worth.
Speaker 2: It’s about turning canvas into cash, so to speak.
Speaker 1: Check out the full edition on our website wearenoyack.com.
Speaker 2: Okay, let’s unpack this for.
Speaker 1: Well, for a long time, art investing felt like something only for the ultra wealthy, Oh, absolutely.
Speaker 2: Very exclusive.
Speaker 1: Yeah, this kind of exclusive club.
Speaker 2: But this edition we’re looking at reveals on a modern, accessible way, especially it seems for younger investors like millennials and Gen Z, to tap into the fine art market.
Speaker 1: That’s right.
Speaker 2: There’s been a real shift.
Speaker 1: So our mission today is to extract the most important nuggets of knowledge from this edition to show you how art can be a strategic part of your financial portfolio.
Speaker 2: So to kick us off, what exactly does this edition tell us about how art builds and preserves net worth?
Speaker 1: What are the core benefits beyond just liking the painting?
Speaker 2: Yeah, good question.
Speaker 1: What’s fascinating here is that this edition highlights several key aspects where art directly benefits your net worth.
Speaker 2: The first one, and it’s a big one, is portfolio diversification.
Speaker 1: OK, diversification.
Speaker 2: We hear that a lot.
Speaker 1: How does art fit in?
Speaker 2: Well, art tends to move independently from traditional financial markets, know, stocks.
Speaker 1: bonds, this low correlation, that’s the key term, it helps reduce your overall portfolio volatility.
Speaker 2: It provides stability, especially uh in turbulent times.
Speaker 1: That’s a huge point.
Speaker 2: So during downturns when stocks might be taking a hit, art could be holding steady or even appreciating.
Speaker 1: Precisely.
Speaker 2: This edition points out that during the 2008 financial crisis, for example, uh blue chip art actually held its value while stocks dropped sharply.
Speaker 1: Wow.
Speaker 2: Yeah.
Speaker 1: Its value is more tied to collector demand, scarcity, things like that, rather than just quarterly earnings reports.
Speaker 2: Makes sense.
Speaker 1: And another crucial benefit is appreciation potential.
Speaker 2: We’re talking blue chip or maybe thematic art here.
Speaker 1: It can appreciate significantly over time.
Speaker 2: Thematic.
Speaker 1: We’ll come back to that, I think.
Speaker 2: We should.
Speaker 1: And finally, art serves as an excellent inflation hedge.
Speaker 2: Ah, the inflation word.
Speaker 1: Always relevant.
Speaker 2: Always.
Speaker 1: As a tangible asset, like, say, real estate, It often retains or even increases in value when traditional markets weaken due to inflation.
Speaker 2: This edition mentions contemporary art delivered over 23 % annually in real returns during inflation-heavy periods.
Speaker 1: 23%, that’s significant.
Speaker 2: It really is.
Speaker 1: And if we connect this to the bigger picture, there’s broader evidence supporting art as a worthwhile wealth tool.
Speaker 2: A Morgan Stanley analysis, which this edition cites, shows that including art in diversified portfolios, helps boost risk adjusted returns.
Speaker 1: Risk adjusted returns.
Speaker 2: Yeah, precisely because of that lower correlation with traditional assets we talked about.
Speaker 1: And it’s not just theory.
Speaker 2: There are concrete examples in this edition.
Speaker 1: I saw numbers about its performance.
Speaker 2: Indeed.
Speaker 1: BMMO reported that art was actually the top performing luxury asset in 2022.
Speaker 2: Top performing.
Speaker 1: Ahead of watches and cars and…
Speaker 2: Ahead of others, yeah.
Speaker 1: With approximately a 30 % return in 2022.
Speaker 2: And it’s seen over 90 % growth in the past decade.
Speaker 1: 90 %?
Speaker 2: Okay.
Speaker 1: Plus, Deloitte and RBC Wealth Management note that over $2 trillion in wealth is tied to art among ultra-high net worth individuals.
Speaker 2: Two trillion?
Speaker 1: Wow.
Speaker 2: Driven by both financial and emotional value, which is an interesting mix.
Speaker 1: And this edition also mentions Blue Chip Art’s impressive 12.6 % annual growth over the past 25 years.
Speaker 2: Solid long-term performance.
Speaker 1: Right.
Speaker 2: So here’s where it gets really interesting for the average investor, I think.
Speaker 1: How is this what?
Speaker 2: $65 billion market becoming more accessible because that traditional view you mentioned eating millions to start.
Speaker 1: Exactly.
Speaker 2: That’s the barrier that’s coming down.
Speaker 1: This edition highlights that the global art market is booming and it’s fueled, interestingly, by millennial and Gen Z investors.
Speaker 2: OK, so what changed?
Speaker 1: The game changer is the emergence of art funds and fractional ownership.
Speaker 2: That’s really key.
Speaker 1: Fractional ownership, like buying a slice of a painting.
Speaker 2: Essentially, yes.
Speaker 1: These platforms provide wider access.
Speaker 2: And importantly, they can significantly reduce buying costs by acquiring works at primary prices.
Speaker 1: Primary prices.
Speaker 2: Right.
Speaker 1: Meaning not at auction.
Speaker 2: Exactly.
Speaker 1: Avoiding those often costly auction markups, it makes a big difference to potential returns.
Speaker 2: So these art funds, they offer clear advantages, especially for people looking for, well, accessibility, diversification, and simpler management.
Speaker 1: With fractional ownership, like you said, you can invest in iconic works, think Warhol, Basquiat, without needing millions up front.
Speaker 2: Which most of us don’t have lying around.
Speaker 1: Precisely.
Speaker 2: It lowers the barrier dramatically.
Speaker 1: And it also means broader diversification within your art investment.
Speaker 2: The fund spreads investments across multiple artists, different genres maybe.
Speaker 1: Reduces your risk on any single piece.
Speaker 2: Right.
Speaker 1: And it simplifies all the logistics.
Speaker 2: The fund handles acquisition, storage, insurance, eventually the sale.
Speaker 1: So it takes away all the headaches associated with owning a physical piece of art.
Speaker 2: The storage, the insurance.
Speaker 1: All of that.
Speaker 2: You get the potential financial benefits without needing a climate controlled vault in your basement.
Speaker 1: OK, that makes sense.
Speaker 2: And this edition also touches on thematic portfolios.
Speaker 1: What does that mean for an investor’s net worth strategy?
Speaker 2: Right, thematic portfolios.
Speaker 1: As described in this edition, they go beyond just buying famous names.
Speaker 2: They let you align your investments with trends or values or specific goals.
Speaker 1: Like what kind of trends or values?
Speaker 2: For example, you might focus on BIPOC artists or art related to sustainability or maybe emerging creators from a specific region.
Speaker 1: Interesting.
Speaker 2: So it’s not just about potential return.
Speaker 1: It’s about both.
Speaker 2: It provides a mix potentially of stable blue chip works and maybe higher growth opportunities from these specific themes.
Speaker 1: It allows you to build wealth while supporting causes you care about.
Speaker 2: Cultural representation, environmental advocacy, whatever it might be.
Speaker 1: This edition specifically mentions NOYACK’s approach, comparing it to other platforms.
Speaker 2: What stands out to you about this comparison?
Speaker 1: Well, this edition clearly states that NOYACK, for instance, aims to surpass competitors like Masterworks by focusing on acquiring art at primary prices.
Speaker 2: Back to the primary price point.
Speaker 1: Yes, it’s a key differentiator, avoiding those expensive auction markups as we said.
Speaker 2: That, combined with thematic portfolios focusing on things like diversity and sustainability, offers what this edition suggests is a smarter value-driven option for building long-term wealth in the art market.
Speaker 1: Got it.
Speaker 2: Now, this edition has a somewhat unexpected angle, integrating art into retirement accounts.
Speaker 1: How does that work for building net worth that doesn’t immediately come to mind for an IRA?
Speaker 2: It doesn’t, does it?
Speaker 1: But it raises an important point.
Speaker 2: The addition notes that art can actually be an ideal addition to self-directed retirement plans.
Speaker 1: Why ideal?
Speaker 2: Because of that low market correlation and the inflation protection we discussed, it makes it a potentially great tool for long-term capital preservation within a retirement strategy.
Speaker 1: Which makes you the nest egg.
Speaker 2: Exactly.
Speaker 1: And holding art in, a self-directed IRA can amplify compounding because the gains are sheltered from taxes, tax deferral, or even tax-free growth, depending on the account.
Speaker 2: That sounds amazing, almost too good to be true.
Speaker 1: But obviously no investment comes without risks.
Speaker 2: What should our listeners be aware of according to this edition?
Speaker 1: Absolutely critical to cover the risks.
Speaker 2: And this edition is very clear about them.
Speaker 1: One is market downturns.
Speaker 2: Yes, even the art market can have them.
Speaker 1: It’s not immune.
Speaker 2: Not entirely.
Speaker 1: It notes that the ultra premium art segment we’re talking works over 10 million dollars is actually underperforming right now.
Speaker 2: Prices have dropped a bit and art backed loans are getting costlier.
Speaker 1: So even art feels the pinch from wider economic shifts sometimes.
Speaker 2: It does.
Speaker 1: It underscores its vulnerability to macroeconomic shifts.
Speaker 2: The other major factor is liquidity and cost challenges.
Speaker 1: Meaning it’s hard to sell quickly.
Speaker 2: It can be.
Speaker 1: Buying art, especially physical pieces, can involve high storage costs, insurance, transaction fees, and resale isn’t always fast or predictable.
Speaker 2: Funds help with some of this, but it’s not like selling a stock instantly.
Speaker 1: Liquidity is different.
Speaker 2: Okay, important considerations.
Speaker 1: So what does this all mean for someone looking to strategically build their net worth through alternatives like art?
Speaker 2: What’s the final takeaway?
Speaker 1: I think the final takeaway from this edition is that art is far more than just decoration.
Speaker 2: It really can be a strategic engine for building net worth.
Speaker 1: An engine.
Speaker 2: I like that.
Speaker 1: Yeah.
Speaker 2: Its appeal lies in that diversification benefit, its resilience against inflation, the mix of aesthetic and emotional value, and crucially, It’s growing accessibility through these alternative platforms.
Speaker 1: So it’s becoming a real option for more people.
Speaker 2: It seems so.
Speaker 1: For investors open to alternatives and willing to weigh those risks we just talked about, thematic art funds, especially those minimizing fees by getting in at primary prices and offering easy access, they can be a really compelling addition to a long-term wealth strategy.
Speaker 1: It’s about looking beyond just stocks and bonds.
Speaker 2: Precisely.
Speaker 1: Broadening the toolkit for wealth building.
Speaker 2: That’s a lot to consider.
Speaker 1: And it definitely changes the perception of art.
Speaker 2: is purely a luxury item.
Speaker 1: For you the listener, consider this provocative thought.
Speaker 2: In a world of increasing financial volatility, how might diversifying your wealth across a broader spectrum of tangible assets beyond just stocks and bonds fundamentally reshape your financial future and resilience?
Speaker 1: Something to think about.
Speaker 2: Remember to subscribe to Noyack Wealth Weekly on our website wearenoyack.com.
Speaker 1: To read the article behind today’s conversation and to get our weekly newsletter straight in your inbox.
