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What’s the deal with art investing?

Let's start with a cautionary tale. Who remembers the $40 Million Elbow?

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September 19, 2023

3 min read

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      In 2006, Steve Wynn accidentally elbowed a hole through a Picasso painting that he'd just sold to Steve Cohen for $139 million. "There was a distinct ripping sound. Wynn turned around and saw, on Marie-Thérèse Walter’s left forearm, in the lower-right quadrant of the painting a slight puncture, a two-inch tear."

      (Don't worry about the Steves. Wynn kept the Picasso, and Cohen owns The Mets now.)

      Art investing is risky, and not just because we have elbows.  

      When it comes to investing, diversification is key. What does that mean? Diversifying your investments means spreading your wealth across multiple assets to help mitigate risk and volatility in your portfolio. Aka, don't put all your money into Bonfire coins.

      How do people diversify their portfolios? Typically a mixture of stocks, bonds, and commodities. And you can also throw real estate, angel investments, and cryptocurrencies into the mix.

      And then there's art. There are pros and cons.

      **The pros** — A work of art can appreciate significantly, beating the typical upswings of the S&P. You can enjoy the creative process: researching, visiting galleries, and getting involved in an artistic community. Plus, art investments are often cushioned from inflation.

      **The cons** — The value of a work of art is unpredictable and disconnected from the stock market. Art is a tangible, it requires maintenance and protection. Buying art is costly, especially if you want to make a safer bet on a more tried and true artist. And finally, it's a non-liquid asset and can be difficult to convert to cash in a pinch.

      A thing of the past?

      Not so fast. Art investing isn't going anywhere anytime soon. What Netflix is to Blockbuster and La Croix is to diet soda, perhaps Masterworks and NFTs are to the art investing world. It's getting easier for the common person to invest in art... but with a twist.

      Non-fungible tokens (NFTs) have been a hot topic of late — like a virtual 'work of art,' NFTs are assets representing anything digital like art, music, or even old tweets. They're bought and sold online, frequently with cryptocurrency. Some are calling it art investing of the future. Some are vehemently opposed.

      Confused? Maybe this will clear things up. This Cryptokitty NFT sold for the equivalent of $172,000.

      The Playbook take

      Folks often view money as the antithesis to creativity. We disagree. Once you have a healthy nest egg in place, give yourself permission to be creative with up to 5% of your investments.

      Want to aim for high growth with low-cost ETFs? Great! If you prefer to play it safer, you can diversify your portfolio with a mix of stocks and bonds. Or maybe you’re feeling very risky and want to dip your toes in art, angel investments, or cryptocurrencies.

      (Yes, even if it means buying the next Cryptokitty NFT.)

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